Executive Compensation, Executive Contribution and Firm Performance in China Listed Companies

Because of the global financial crisis in 2008, most of Chinese listed companies had a sharp decline in profits, but some executive compensation presents the opposite side, especially the over high salary of some executives in state-owned firms caused blame sound everywhere. Some scholar and officer think that the incentive to managers (agency) must be based on firm performance, but we argue that there is obvious difference between the firm performance and the executive contribution, and whether the payment of top management should be related to the firm performance or the executive contribution is still a hot question. This paper put forward and defined the conception of executive contribution to solve the above problem, and had an empirical analysis among executive compensation, executive contribution and firm performance based on 354 state-owned listed companies in China form 2006 to 2010. Our research results are help some institutions find a reasonable benchmark for the amount of executive compensation, and build a better incentive mechanism for the executive effort.