The Influence Of Board Characteristics On The Executive Compensation And Compensation-performance Sensitivity

In recent years,the frequent comparison between the high-paying to the executives and poor performance of listed companies has attracted strong attention from government departments and the general public.Ma Mingzhe,chairman of Ping’an Company,was exposed to give himself an annual salary of up to 60 million yuan,which caused widespread controversy in the society.The “Occupy Wall Street” campaign broke out in the United States in 2011.Thousands of demonstrators gathered in Manhattan,New York.And one of their main protests was to oppose the high wage of managers.Therefore,how to control the executive compensation level and improve the executive compensationperformance sensitivity from the internal governance level of the company has become an important issue for enterprises.The board of directors plays a key role in corporate governance.The original purpose of the board of directors is to solve the agent problems between shareholders and professional managers.One of its key functions is the supervision function.In this case,it is extremely important to explore the relationship between corporate board characteristics and executive compensation and compensationperformance sensitivity.At the same time,more and more foreign scholars tried to explain the relationship between the board characteristics and executive compensation and compensationperformance sensitivity by using incomplete contract theory,as Hart won the Nobel Prize in Economics in 2016 for the theory.Hart pointed out that the contract signed between the managers and the shareholders must be incomplete.At this time,the effective allocation of the remaining power which was not included in the contract is particularly important.They can use these powers to pursue personal interests such as making high pay for themselves if the manager has predominated the excessive power.Therefore,more and more scholars are beginning to explore how the characteristics of the board can allocate the residual control under the incomplete contract to control the executive compensation level and improve the compensation-performance sensitivity.The current research of our country on this issue is mostly focused on the impact of board characteristics on the executive compensation.The research on the relationship between board characteristics and compensation-performance sensitivity is relatively few.This paper takes the data of A-shares of listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange from 2005 to 2016 as the sample to explore the influence of board characteristics on the executive compensation and compensation-performance sensitivity.The characteristic variables of the board of directors selected in this paper include a series of indicators,such as whether the chairman and the general manager are integrated,the frequency of board meetings and the scale of the board of directors and so on.We build a research model and use the method of multiple regression analysis for empirical analysis on the basis of previous studies to explore the relationship between them.At the same time,the paper puts forward some suggestions at the micro and macro levels for the listed companies according to the research results to help them to relieve the executives’ high salary problem,which is becoming more and more intense in recent years.The results of the study indicate that the combination of the two roles of chairman and general manager,the increase in the frequency of board meetings,the increase in the average age of directors,and the increase in the proportion of chain directors in the board of directors will significantly increase the level of executive compensation.The study also found that the combination of the two roles of chairman and general manager,the increase in the average age of directors will promote the rise of executive compensationperformance sensitivity level,and the increase in the frequency of board meetings will lead to the decline of executive compensation-performance sensitivity.The relationship between the proportion of chain directors on the bo ard of directors and executive compensation-performance sensitivity is not significant.The study also tests the results of the results by group regression and substitution of research variables to verify the empirical results.And the results are still valid.