An Empirical Study Of Hi-Tech Enterprises TMT Salary Fairness And Corporate Performance

Social comparison theory views that narrow the pay gap among the top managersand take effective compensation incentive for managers can enhance the performanceof the company. Executives’ compensation incentive problem is a very important anddifficult point in academic and the real world. The current research focused on thedeterminants of executives’ compensation and the correlation of the executives’ paygap on firm performance, but there is little research from the equity inventiveperspective on pay for performance. At present, china listed corporation’s executivepay gap is too large, and the unfair thing frequent happens caused the academia andthe public concerned about the executive pay fairness. As we know, salary internaland external equity have an important impact on manager behavior, and whosebehavior changes may have an impact on corporate performance. In order toinvestigate how internal and external pay fairness of top management teamsinfluences the corporate performance, this paper based on the literature research,social comparison theory, equity theory and psychological perspective discusses thepay fairness impact on top management teams results, which expect to expand theresearch perspective of salary incentive. With the continuous development ofinformation technology, IT technology and medicine as the represent of thehigh-technology have become an important force to promote the economic develop.It’s not only has practical significance to search top management teams pay fairness inlisted high-tech enterprise, but also provide a new insight from managementpsychology perspective.This paper study investigates how internal and external compensation equity oftop management teams influences the corporate performance in Hi-Tech companiesby multivariate statistical analysis regression. From the beginning, we use empiricalresearch method combine with standard research method. Based on the literatureresearch and analysis, we have a brief relevant literature review and make somecomments. Then, elaborate and learn social comparison theory, fairness theory, andpay incentive theory to make sure the basis of this paper theoretical. And third, weanalyze the relationship between in-external pay fairness of TMT compensation andcorporate performance, and then put forward paper hypotheses, but before we propose assumptions we need define some relevant concepts such as what is high-techenterprise and what is executive pay fairness. In the empirical part, there have manystudied objects in the full sample of listed companies in Shanghai and Shenzhen, butless considerate about industry segments. Because of different industry salaryincentive, enterprise operation and pay system have different impact on performance.Currently, high technology plays a significant role in china’s economic development,and technical pearsonnel wages are much higher than other types of employees, sothis paper select high-tech enterprises TMT in-external pay equity as research sampleto search the correlation of pay fairness and corporate performance, which has meanto optimize the salary packages for TMTs and improve employee’s compensationsatisfaction. The financial data of listed high-tech corporate for empirical research iscollected from Shanghai and Shenzhen A share markets during2005to2012. We useTMT compensation decided methods build the model to get residual instrumentalvariables, and construct top executives’ pay equity and corporate performance model.Using regression analysis measure of the relationship between TMT pay fairness andperformance to verify assumes. And the last, the paper not only give results ofdescriptive statistics and regression analysis, but also studies the duality of boardchairman and executive, the size of company, the ultimate controllers, board size,region and year controlling variables.The conclusions of this paper are: Listed high-tech enterprises top manage teammembers choose peers pay package as external pay equity reference objects. WhenTMTs pay level larger than the peers pay level, executive team members get fairtreatment in the remuneration and they would work hard to enhance group cohesionand improve the performance. The positive result of additional remuneration amongtop management teams in listed high-tech enterprise has a significant positivecorrelation with corporate performance. However, when TMTs pay gets lower paythan the peer’s salary level, manage group members would have the feeling of unfairtreatment and negative behavior would be taken to offset the unfair perception. Thenegative result of additional remuneration among top management teams in listedhigh-tech enterprise has negative impact on performance. Fairness theory and socialcomparison theory have been verified in the listed high-tech enterprise. On the otherhand, listed high-tech enterprises top management group members choose generalmanager pay package as internal pay equity reference objects. When TMT membersreceive additional remuneration was greater than general manager, the groups gotoverpaid compared with the general manager, and they would work harder to improve corporate results. The overpay among top management teams in listed high-techenterprise has a significant positive correlation. Meanwhile, when TMTs pay getslower pay than the general manager salary level, manage group members would havethe feeling of lower paid and unfair treatment, team members negative behaviorwould be taken to offset the unfair perception. Behavioral theory narrow the pay gapamong top management team in the listed high-tech enterprise has been verified. Atthe same time, we test executive member’s heterogeneity and remuneration.Innovations of this paper are as follows: Based on the social comparison theoryand behavioral theory perspective, this thesis studies the relationship between topmanagers internal pay gap within the team and external pay gap within the peer’scomparison market, to explore how the TMTs’ salary equity influence on performanceand expand research perspective on pay incentive. This study puts forward thefollowing suggestions according to the research: optimize top management teamssalary structure and set the reasonable acceptable pay gap to improve corporateperformance; establish and improve the professional manager market to improve thequality of managers professional; enhance the transparency of high-tech enterprisesalary design program, lets employee take participate in pay package design andrestrict the executives salary incentive.