Two Issues Should Be Paid Attention To In Executive Compensation Design

< p > the Ministry of human resources also said that a general norm of executive compensation covering all state-owned enterprises is in the process of preparation.

Executive compensation has gradually become a topic of concern for enterprises.

However, there are still some notable problems in the process of determining executive compensation in most enterprises: < /p >

< p > < strong > 1. The main performance of executive pay is < /strong > /p >

< p > 1, the link between executive pay and enterprise performance is unconvincing.

Some enterprises benefit very well, but the income of senior executives is not high. Some enterprises are losing money in successive years, but the income of executives can be as high as millions or even tens of millions of yuan.

With the outbreak of China Aviation Oil incident, the annual salary of Chen Jiulin, the senior officer of China Aviation Oil Company, has also been questioned.

In China, the profits of some large state-owned enterprises and central enterprises are based on monopoly, not the embodiment of executive ability.

At this time, it will be difficult for the executives to accept the sky high salary.

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< p > 2, short term salary incentive.

The short term salary incentive means that in the salary structure, the proportion of the fixed part and the part related to the short-term benefit of the enterprise is too large, which leads the operator to only pursue short-term interests and ignore the long-term development of the enterprise, sometimes even at the expense of the long-term development of the enterprise in exchange for short-term goals.

At present, the remuneration of business operators in China usually takes the form of wage plus bonus or annual salary system, but whether it is wage plus bonus or annual salary system, it is a short-term incentive.

In the form of wage plus bonus, wages are generally not related to the performance of the operators. Although the bonus is linked to the performance of the operators, it evaluates the business behavior of the operators in the past year, and the annual salary system determines the income of the operators in the annual unit, so they are all short-term performance oriented salary systems.

Taking the performance of the current period as the basis for assessing the operating conditions, it is not conducive to the senior managers to plan the future development of the company from a strategic perspective.

In order to get short-term benefits, executives can get short-term performance through extreme behavior, which is unfavorable to the long-term development of the company.

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< p > 3, executive pay supervision is not effective, equity incentive is a mere formality.

The equity incentive mode is only a mere formality. Few companies will design according to their own conditions. Besides, the compensation committee mechanism of our country is still not perfect, and there is a manager's internal control mode, which leads the executives to manipulate the profits of enterprises by using their functions and powers, so that the remuneration is not fair and effective.

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< p > 4, there is a big difference in executive pay level.

There are great differences in executive pay between different industries in China, ranging from tens of thousands to millions of annual salaries, or even tens of millions.

Even in the same company, there is a big difference in the salary of each management.

In fairness theory, individuals not only attach importance to their absolute salary, but also pay relative attention to others.

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< p > 5, blindly learning western salary design, resulting in the compensation system in Chinese enterprises "acclimatized".

However, the West has been reflecting on the drawbacks of the high salary of executives, such as the sky high salaries of executives in the United States. In recent years, it has been questioned by the public more and more: is it reasonable to give executives a large number of stocks and options? Whether the high salary is linked to the performance of executives? Some enterprises in China still blindly learn western salary design, which is known as "international integration", but ignores the drawbacks of the compensation system and its adaptability in Chinese enterprises.

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< p > < strong > two, how to design executive pay < /strong > /p >

< p > how to give full play to the incentive effect of executive compensation and the recognition of employees is a question that needs to be considered in the design of executive compensation.

It is suggested that when designing remuneration for senior managers, enterprises can consider from the following aspects: < /p >

< p > < strong > 1, improve the long term incentive a href= < http://www.91se91.com/news/index_c.asp > reward system < /a > /strong > /p >

< p > in view of the short term incentive of executives at present, it is suggested that a reasonable equity incentive should be adopted to bind senior executives' interests to the long-term interests of the company.

The equity incentive system is essentially a long-term incentive payment system, which means that executives can hold stock or stock options to make them shareholders of the company, so that the personal interests of executives can be linked to the long-term interests of enterprises, thereby enhancing the effectiveness of salary incentives, preventing short-term actions of managers, and promoting management to maximize the interests of shareholders in establishing long-term performance evaluation system.

EVA stock option is the most important long-term incentive method adopted by Western listed companies.

With the maturity of China's capital market, enterprises can gradually try to implement the way of equity incentive to achieve long-term incentives for executives.

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< p > < strong > 2, ensuring the pparency of the salary system and establishing the constraint mechanism of executive pay < /strong > /p >

< p > complete, clear and accurate information disclosure is the most effective incentive and restraint mechanism for executive compensation, while some enterprises in China are not sufficiently disclosed for executive compensation information.

Only by ensuring the pparency of executive pay information can the company be placed in the eyes of investors and stakeholders to better monitor and restrain senior executives' behavior.

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< p > < strong > 3, adopting a variety of < a href= > http://www.91se91.com/news/index_c.asp > performance evaluation < /a > index < /strong > /p >

< p > linking executive pay with business performance may result in some accounting fraud. Some executives can achieve high returns by modifying accounting statements.

Simply using financial indicators as executive performance appraisal often brings some problems.

Therefore, the establishment of a scientific, objective and fair performance appraisal system can effectively motivate executives to promote the company's overall goal and behavior.

Executive compensation must be linked to the company's performance and fluctuated as the company's performance goes up and down.

Performance indicators should reflect comprehensive indicators such as shareholder returns and company value creation. There are also some long-term indicators, such as corporate profitability and market value, and growth indicators such as market occupancy rate growth, reflecting indicators of corporate earnings quality.

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< p > enterprises should consider the following factors when formulating performance evaluation indicators: first, we should assess the company's operating performance indicators, such as net assets yield, net assets growth rate and net profit index; secondly, when evaluating the performance of our company, we should take into account the size of the company and the economic development level of the company's own regions.

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< p > < strong > 4, strengthening < a href= "http://www.91se91.com/news/index_c.asp > < remuneration committee < /a > reform < /strong > /p >

< p > the guiding principles for the construction of China's remuneration committee: one is truly independent; the two is the right to make and supervise remuneration.

The Remuneration Committee should be made up of truly independent directors. That is to say, in addition to obtaining directors' remuneration from the company, there is no other relationship with the company to ensure that directors can independently judge the executives.

The Remuneration Committee should be dedicated to the remuneration of executive compensation, including equity incentives, hiring of executives, retention and departure contracts, and so on.

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< p > in addition, when the executive compensation system is formulated, the Remuneration Committee should give full play to its independent judgement and determine the reasonable remuneration level of senior executives, rather than stick to the level of remuneration in the same industry and company history.

The company's human resources department or other departments can make suggestions and comments on the remuneration of the company's executives, but the final power is exercised by the Remuneration Committee.

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< p > aiming at the problems often appeared in the design of executive compensation, we need to pay attention to the following four points in the design of executive compensation: 1, improve the long-term incentive payment system; 2, ensure the pparency of the salary system, establish the constraint mechanism of executive compensation; 3, adopt a variety of performance appraisal; 4, strengthen the reform of the Remuneration Committee.

Only a reasonable executive compensation design can give full play to the incentive effect of executive compensation, as well as the recognition of employees.

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