Research On The Correlation Of Executive Compensation Incentive And Corporate Performance

With the development of economy and technology of our country,human capital is becoming more and more prominent in the enterprise. How to attract and retain the talents has become the focus of enterprise, and how to exert the talent of the executive to improve enterprise performance becomes more important. In recent years, China’s economy is at the digestion period when the productivity is at the stage of slow development. However, with the frequent happening of high salaries events toward the executive, the executive pay has been pushed to the center of storm. Whether the executive pay is related to the enterprise performance and how to develop the executive pay incentive system are what we urgently want to know.Therefore,the correlation between the executive pay incentive and the company performance is studied in this paper.Firstly the paper analyzes the domestic and foreign literature, defines some important concepts, and describes the theoretical basis of this paper. The theories include the principal-agent theory, psychological contract theory, incentive compatible and incompatible incentive theory, tournament theory and the optimal compensation contract theory; Secondly the paper collects the annual report data of A listed companies between 2012 and 2014 of Shanghai and Shenzhen stock exchange, and statistically analyzes the correlation between the executive compensation incentive and the enterprise performance. This paper uses the method of Random-effects GLS regression to respectively study the correlations between the executive equity compensation incentive, executive monetary compensation incentive and enterprise accounting performance, market performance. Besides, this paper also takes the nature of ownership as a moderating variable, and analyzes the moderating effect of the nature of ownership on enterprise salary incentive and enterprise performance.From the empirical analysis results, we can draw the following conclusions:(1)Executive monetary compensation and enterprise performance has significant positive correlation. That shows that the executive monetary compensation incentive andenterprise performance are linked when China’s listed companies signed the compensation contracts with the senior managers; similarly, when they have obtained or expected to obtain high monetary incentive, they will work more diligently and harder to improve the enterprise performance.(2)Executive equity compensation incentive and corporate accounting performance are not significantly positive correlated, but executive equity incentive compensation has a significant positive correlation with market performance.(3)The nature of ownership does not have moderating effect in the influence of enterprise monetary compensation incentive to enterprise performance, but it has negative moderating effect in the influence of corporate equity compensation incentive to corporate performance. That shows that in the state-owned holding enterprises, equity incentive did not fully play the role of incentives and managerial ownership is likely to become the tool of seeking self-interest of executives. Through the research, this paper provides some references for the development of reasonable salary system and the choices of the executives’ career, and it also provides ideas for the reform of the remuneration in state-owned enterprises.