Can Party Organizations Participate In The Governance Of State-owned Enterprises Curb Executive Compensation Manipulation?

Since the reform and opening up,the executive compensation of state-owned listed companies has been widely concerned by all sectors of society.Since the founding of SASAC in 2003,the state has been pushing the compensation reform of state-owned enterprises while trying to establish a more reasonable remuneration contract to encourage the executives of state-owned enterprises.But the media frequently exposure of the state-owned enterprise executives’ sky-high compensation,compensation gap,compensation and performance upside down have violated the aim of compensation contract design.Behind it,under the lack of the external market mechanism and internal supervision mechanism of state-owned enterprises,the short-term profit-seeking behavior induced by the executive power expansion.The consequence of executive power rent-seeking damages not only the interests of state-owned enterprises,but also the reputation of state-owned enterprises.In order to curb the self-interest of executives of state-owned enterprises,the relevant state departments issued a series of related rules to prevent executives of power from rent-seeking,but these actions belong to governments’ External political interference that can only make up the lack of the external market mechanism of state-owned enterprises.However,the lack of the external market mechanism of state-owned enterprises can be only made up by internal governance of state-owned enterprises.So the party organization of internal political interference by state-owned enterprises,does it can have a role in regulating the state enterprises? Can it curb executive compensation manipulation ? Under the background of the new era and the wave of the reform of state-owned enterprises,it is extremely important to explore the governance effect of party organization that take part in the governance of state-owned enterprises,analyze the context of a new round of reform of state-owned enterprises,harmony and unify party leadership and the company governance,and clear the legal person status of party organizations in corporate governance structure of state-owned enterprises and the design problem of state-owned enterprise executive compensation contract.Based on the above analysis,this article takes the state-owned listed companies as samples from 2007-2016 to build appropriate model and make regression.The regression results show that in the state-owned enterprises’ executive compensation contract,executive compensation always have extra sensitivity for the better performance indicators.This part of sensitivity are got by executives who manipulated performance indicators from compensation contracts.And the more power the executive own,the strongest the sensitivity.Corporate party organization took pert in enterprises governance can restrain extra sensitivity that executives show to the better performance indicators.And its essence is to restrain executive compensation manipulation and also its governance effect mainly play a role through the restriction of executive power.The main contributions of this paper are as follows:First,this paper analyses the covert compensation manipulation of senior executives from the level of pay performance sensitivity in the design of executive compensation contract.It studies the effect of the unique corporate governance structure of China-party organization on this mode of manipulation.And it enriches the related research on executive compensation manipulation and party organization’s participation in corporate governance.Secondly,the empirical research on the impact of Party organization’s participation in corporate governance on executive compensation is only considered in three aspects: executive absolute salary,excess salary and pay gap(Ma Lianfu,Wang Yuanfang and Shen Xiaoxiu,2013),and it does not involve executive pay performance sensitivity.Therefore,this study broadens the perspective of the party organization to participate in corporate governance and executive compensation.According to the conclusion of the regression results,the following countermeasures and suggestions are proposed: firstly,the executive power should be reasonably granted to form an effective system to supervise and balance the power of management.Second,establish and improve the management and assessment system of executive compensation.Third,strengthen the coordination and unity of party organizations and corporate governance and actively promote the participation of party organizations in corporate governance,and give full play to the oversight role of party organizations.