Research On The Impact Of "CPC’s Party Building Into Articles Of Association" On The Pay Gap Of SOEs

The party organization,as the “nerve ending” of the Communist Party of China in the field of grassroots economy,has an important impact on the management and decision-making behavior of enterprises.With the continuous deepening of China’s reform of SOEs and reform of economic system,the functions of primary party organizations in enterprises have been further improved in practice.In 2015,China innovatively proposed“CPC’s party building into articles of association”,a new form of the embedding of party organization,which realizes the steady progress of the two “consistency” principles,upholding the party’s leadership over SOEs and establishing a modern enterprise system.On the other hand,in recent years,the issue of corporate pay gap in China has attracted much attention.China’s guiding ideology on the relationship between fairness and efficiency has gradually shifted from “efficiency first and due consideration to fairness” to “focusing on fair distribution and achieving common prosperity”.Policies such as “executive compensation regulation”are also imposed to narrow the pay gap in SOEs.Giving consideration to China’s attitude on reducing the pay gap,this article starts with “CPC’s party building into articles of association”,the new form of the embedding of party organization,and discusses the impact of “CPC’s party building into articles of association” on the pay gap of SOEs.This study uses the data of China’s A-share state-owned listed companies from 2015 to 2019 as the sample and examines the impact of“CPC’s party building into articles of association” on SOEs’ pay gaps.The results show that:(1)“CPC’s party building into articles of association” can decrease SOEs’ pay gaps;(2)The effect of “CPC’s party building into articles of association” on decreasing SOEs’ pay gaps is more pronounced in local SOEs;(3)The effect of “CPC’s party building into articles of association” on decreasing SOEs’ pay gaps is more pronounced in SOEs without political connections;(4)Channel test shows that “CPC’s party building into articles of association” can decrease compensation of top management of SOEs without affecting employees’ compensation,thus realizing the decrease of SOEs’ pay gaps;(5)Mechanism tests show that“CPC’s party building into articles of association” has stronger inhibitory effects on SOEs’ pay gaps in competitive SOEs,commercial SOEs,SOEs with more pyramid levels and SOEs with weaker external supervising.This study investigates the impact of “CPC’s party building into articles of association” on SOEs’ pay gaps and finds that “CPC’s party building into articles of association” has a positive effect on decreasing SOEs’ pay gaps by integrating the adherence to the party’s leadership over SOEs and corporate governance,which proves that the institutional arrangement of“CPC’s party building into articles of association” has important theoretical implications and policy enlightenments for deepening the reform of China’s state-owned enterprises.