Research On Correlation Between Other Comprehensive Income And Executive Compensation

In June2009, the ministry of finance issued "accounting standards for enterprises of the3rd explaining", requests the enterprise doing the appropriate adjustment for the financial report presentation content, proposing that the enterprise should increase "other comprehensive income" and "comprehensive income" projects in the income statement columns, and require announcing the other comprehensive income detailed in the notes. This is the landmark event in the journey of the income statement reform, marked our country’s income view changing from revenue and expense view to the concept of assets and liabilities. The concept of other comprehensive income will be included changes of the original capital reserves of the fair value to the income statement, improving the situation that the enterprise is unable to fully reflect their income. Therefore, the size of other comprehensive income depends largely on the management classification of financial assets and the trading time decision, so the change has inevitable relations with effort level executives, which will inevitably affect the development of executive compensation.Executive compensation contract has been regarded as the important tool to solve the problem of agent between principal and agent. Reasonable compensation contract mechanism can make full use of available information effectively to measure the efforts of the executive and maximize the shareholders’ interests. As the important part of the performance of listed companies, Other comprehensive income is bound to cause the attention of management personnel. So is there existing the fair value impact on the operating performance of listed companies? This article will attempt to inspect it from the perspective of other comprehensive income compensation mechanism of the implementation of the consequences, hoping to provide some reference for the design of the executive compensation contract.Based on the A-listed companies from2009to2012which held the other comprehensive income, we mainly inspect the correlation between executive compensation and other comprehensive income, and in accordance with the plus or minus of other comprehensive income group to analyze the changes in positive and negative impact on executive compensation. The main research conclusions are:(1) The introduction of other comprehensive income improved the effectiveness of executive compensation contract design, eliminating the function of "lock" phenomenon.(2) There are no problems of "prize light punishment" in the capital reserves included in the changes of the fair value gains and losses, suggesting that the compensation system in China is gradually perfect.(3) We need to further improve the design of China’s executive pay and make rational treatment to other comprehensive income information. Based on this, this paper puts forward the following countermeasures:we should further perfect the related of the fair value criteria, give full play to the usefulness of accounting information; To further optimize the structure of compact design, we should pay attention to the adoption of equity incentive mode; To strengthen the construction of enterprise internal environment, we should perfect the corporate governance structure; To strengthen the supervision and management of external institutions, we should pay attention to the supervision of the intermediary role.