The Research About The Influence Of Professional Background Of Independent Directors To Executive Compensation Performancesensitivity

In recent years,frequent exposure of executive high pay,caused people pay more and more attention to the problem of executive compensation of listed companies.No significant increase in corporate performance,and even some companies slashed,but executive still get highly paid,this makes people have questioned on the rationality of executive pay.Modern enterprise ownership and management rights of separation,which leads to the principal-agent problem between the owner and operator.In order to solve such problems,executive compensation contract mechanism were put forward.And in order to measure the validity of the executive compensation mechanism,we select executive pay performance sensitivity as a measure.The independent director system in China has more than 10 years,the independent directors of the listed companies hire instead of shareholders’ supervision and management of day-to-day conduct,and improve the company’s performance,restricts the self-interested behavior of executives,and improve the company’s performance,truly make executive pay performance-related.And when the independent directors have different professional background,they can make use of their own expertise and resources advantage,industry experience on compensation performance sensitivity.Therefore,in order to test the independent director’s professional background influence on executive pay performance sensitivity,this paper uses A-share listed companies from the year 2012 to 2014 as samples,build multivariate regression model,test the influence of executive pay performance sensitivity when independent directors have law,market or financial academic background. Considering the special economic environment of China,conduct the research according to the ownership property.The results show that:(1)Executive pay and corporate performance is positively-related.(2)When the independent director has the legal professional background,because of the lack of financial and market involves the income index of the knowledge,they cannot effectively supervise executive,and may even become the high pay reasonable legal tools,results in the decrease of executive compensation performance sensitivity.(3)The independent director has market professional background,can understand the real level of profit,to prevent rent-seeking behavior of executives,strengthen the executive compensation performance sensitivity. (3)If independent directors have financial academic background,they master more thoroughly about the annual report financial indicators,also make it easy for them to help executives to manipulate the company’s actual performance,results in the decrease of executive compensation performance sensitivity.On the basis of the above research conclusion,policy suggestions are put forward from the external market environment and internal governance.