Empirical Research On The Relationship Between CEO Pay Sliceand Company Performance Based On Managers’ Power

Private enterprise executives hold the power of allocating corporate resource. Theyare decisions makers and implementers of company. The top managers are the corecompetitive power of enterprise of survival and development. Set reasonableremuneration of top managers’ is a key factor to promote the level of corporates’performance. The pay gap among top managers is one of the key issues to achieve theoptimal value of resources and make compensation encouraging managers to workharder.The atrial is based on research of home and abroad about tournament theory andbehavioral theory. This paper takes managers’ power as the moderator considering theimportance of managers’ power in the field of corporate governance to test thefoundation of managers’ power between pay gap and corporates’ performance. Thearticle has the following conclusions:First, Pay gap among managers has a negative impact on corporates’ performance inprivate companies. To some extent, behavioral theory is more suitable compared totournament theory in private companies. Although the result is not so significant, we canproof the relationship between CEO pay slice and companies’ is negative. The mainreason is that, family enterprises accounted for a large proportion in private enterprises.In the familial enterprises, managers prefer to believe "families’ members ". They think"families’ members" is worthy of trust. Therefore most of the leaders of private enterprisecome from their own families. It is difficult to establish trust relationship in the team.Therefore, the large pay gap will have negative impact on enterprise performancebecause of discontent.Second, the moderating role of managers’ power is unstable. The index of“dual-when chairman of board and general manager is one person” and Board size andhas a negative relationship on the relationship between pay gap and companyperformance. When the general manager has shares in the company, the relationshipbetween executive compensation and enterprise performance is negative. Therefore, forprivate enterprises of China, we can’t conclude that the relationship between pay gap and company performance has a positive or negative relationship under the moderating ofmanagers’ power. We should identify the feature of specific managers’ power source toanalyze the relationship.