Family Characteristics,Pyramid Structure And Executive Compensation

The family enterprise is one of the main components of China's economic system.It plays a positive role in the economic growth and employment situation.According to the survey report on the global family business in 2016,in the unstable situation of the global economic recovery,73%of the family enterprises still maintain business growth,making a great contribution to the long-term development of the country.Executive compensation as a governance mechanism of modern enterprises,it has long been considered an important tool to overcome agency problems between owners and managers.However,many problems such as "excess pay" and "decoupling between pay and performance seriously" have aroused widespread concern in society.According to the principal-agent logic,the characteristics of family enterprises,including family control characteristics,family management characteristics and family equity characteristics.It will have an impact on the agency problem between owners and managers.And it must be reflected in executive pay and pay performance sensitivity.At the same time,more and more family businesses use the pyramid structure,expanding the scale through lengthening the control chain,which leads to the more serious problem of the deviation between control rights and cash flow rights.It causes the second agency problems.Family controlling shareholders and executives conspired to grab the interests of small and medium shareholders.The concerns of agency problems in family businesses gradually turn from the first agency cost to the second agency cost,which will also have a great impact on executive compensation in family businesses.Reviewing the existing literature,we have not yet reached the consensus of many problems in family businesses,there is little empirical research about the executive compensation and pay performance sensitivity in family enterprises.This paper has the theoretic and practical meanings.This research takes listed family enterprises as the object,according to the degree of family involvement and control,divides family enterprises into two categories:narrow family enterprises and natural person listed enterprises,and analyzes the role of family characteristics to executive compensation.In view of pyramid structure,selecting two variables—the deviation of control right and cash flow right and the pyramid layer to study the influence on executive compensation.Based on the data of 2009-2011 years' family enterprises listed in small and medium sized boards in Shenzhen Stock Exchange,this paper empirically explores by the measurement method of multiple linear regression.The specific arrangements for this article are as follows:The first part divides into four parts,including the research background,the purpose and significance,research methods and ideas and innovations and characteristics;the second part induces and summarizes the relevant research literature at home and abroad;the third part reviews and collects the relevant theoretical knowledge and put forward the corresponding research hypothesis;the fourth part is the research design,mainly including explaining the related variables and constructing the research model;the fifth part is the empirical analysis,including four aspects:descriptive analysis,Pearson correlation analysis,multiple linear regression analysis and robust analysis;the sixth part summarizes the conclusion,and in view of the actual situation of family enterprises,put forward the corresponding countermeasures,points out the shortcomings and expectation for future research.The conclusions of this paper are as follows:The first part is family characteristics and executive compensation:(1)family control and executive compensation:the executive contribution and pay performance sensitivity of family enterprises are significantly lower than the non-family enterprises,but the difference of executive compensation between the two family enterprises is not significant.(2)family management and executive compensation:whether family members served as executives significantly reduced executive compensation in natural person listed enterprises,and significantly reduced executive pay performance sensitivity in narrow family enterprises.(3)family equity and executive compensation:In narrow family enterprises,when family members are senior executives,cash flow right negatively affects executive pay performance sensitivity.The second part is pyramid structure and executive compensation:(1)In the natural person listed enterprises,the deviation of cash flow right and control right has a significant impact on executive compensation and pay performance sensitivity:improve the level of executive compensation and lower executive pay performance sensitivity.(2)In the natural person listed enterprises,the pyramid layer is directly proportional to the executive compensation,but does not exist in the narrow family enterprises.There is no significant correlation between the pyramid layer and pay performance sensitivity in the two types of family enterprises.To sum up,family control and management characteristics can reduce executive compensation and pay performance sensitivity;while the adoption of the pyramid structure will increase executive compensation and reduce executive compensation sensitivity.But there is different effect in different type of family enterprises..Finally,according to the conclusion of the study,putting forward from two aspects of suggestions-internal and external,in order to improve the rationality of executive compensation in the family enterprises,improve the effectiveness of family enterprise governance and realize the long-term development of the family enterprises.