The Research Of The Relationship Among Business Strategy, Executive Compensation And Firm Performance

The essence nature of enterprise is the organic unity of production system and economical relationship, while the enterprise performance has always been an important variable of management researches, as well as the manifestation of the core competitiveness of an enterprise. The high performance enterprise is featured by the closely and effectively combination of human resource strategy and enterprise development strategy with the human resource strategy having the 43% integral influence ratio towards the enterprise strategy, which almost is the 2 times of other influential factors. On August 29, 2014, political bureau of the central committee of the CPC has held a meeting, which has audited and passed the Reform Scheme for Salary System of Principals of Central Management Enterprises. The meeting has proposed to deepen the regulation reform for salary system of principals of central management enterprises, and establish the differential salary distribution method which confirms to the choosing and appointing methods of principals of central enterprises, and suits to the functions and natures of the enterprises. Therefore, deep analysis toward the salaries of principals which suits to the enterprise strategy, and determination basis of principals salary have significant importance to the regulation reform toward principals salary.Guidance by the principal-agent theory, contingency theory and competitive strategy theory, this thesis has summarized and teased the literatures relating to the relationship between principal salary and operation performance, relationship between principal salary and enterprise competitive strategy, as well as the relationships among enterprise competitive strategy, principal salary and enterprise operation performance, thus proposing the assumptions that the enterprise with differential production strategy has a larger performance salary ratio that enterprise with cost advanced strategy, and that the mismatching of competitive strategy and performance salary will cause positive influence to performance. Setting the 504 listed manufacturing enterprises as research objects, this thesis classifies the sample enterprises according to strategy by adopting the hierarchical cluster analysis method, and then researches the influence of different matching degree of principal salary and enterprise strategy toward enterprise performance through contingency method and 2-stage method. This research also confirms the proposed assumptions, namely the enterprise with differential production strategy has a larger performance salary ratio that enterprise with cost advanced strategy, and the mismatching of competitive strategy and performance salary will cause positive influence to performance through hierarchical cluster analysis, descriptive statistical analysis, correlation analysis, regression analysis and other quantitative analysis methods in empirical study.The empirical study shows: both descriptive statistics and regression analysis show that the enterprise with differential production strategy pays more performance salary than enterprise with cost advanced strategy; the correlation analysis shows that the logarithm of principal salary has significant correlation with Tobin Q values(the Tobin Q values is the supplementary of enterprise’s operation performance), namely the principal salary has significant correlation with enterprise operation performance; meanwhile, the first stage regression analysis of the model(2) shows that the principal salary and ROA have obvious positive correlation with sales volume, namely the principal salary has significant correlation with enterprise operation performance; the 2 stages’ regression analysis of model(2) are all obviously show that the unmatched strategy and principal salary have obvious negative correlation with enterprise performance.Finally, according to the relationships among enterprise competitive strategy, principal salary, and enterprise operation performance of empirical study, this thesis proposes following advertisements:(1) Setting reasonable salary scheme, which shall not only pay attention to the structure rationality and form diversity of salary, but also focus on the encourage effects of pension plan, medical insurance and position subsidies. In addition, broadening the long-term encourage mechanism, such as share increase and improving the retirement protection methods so as to effectively prevent the short-term actions of principals.(2) The principal salary scheme shall confirm to the competitive strategy of the enterprise so as to facilitate the enterprise performance.(3) Establishing a reasonable performance evaluation system for principal, which shall appropriately input non-financial index so as to reasonably match the principal salary, management performance, and evaluate the operation results of principal accurately and reasonably.