top executives compensation
Top Executive Compensation Packages
In the job market, while employees select their employers, employers also select their employees. One of the most important elements that employers might take into consideration is salary. Executive salary could be classified into two groups: the short-term salary and the long-term salary. Short-term salary mainly includes wage, insurance, welfare and bonuses. Stock incentive is one of the modern long-term salary types and the incentive system is used to solve the basic principal-agent relationship between shareholders and managements in modern corporations. Both the short-term salary and long-term salary motivated most of the top executives. This is supported by Firth, Fung, Rui (2007) who claimed that the salaries of top executives are positive correlation to the performance of the company.
However, the profits of shareholders and executives are not always consistent. Shareholders rely on top executives to adopt policies that maximize the value of their shares. But top executives tend to engage in activities that increase their own financial well-being. This problem was noticed by Bede and Means, who also named it as “The Principal-agent Theory” in the 1930s in America. Therefore, shareholders have to design incentive compensation packages and sign contracts with executives to combine their interests. By comparing the payment system of both the top executives in the UK and China, this essay is going to give suggestions on compensation packages management and to make a win-win system for both the shareholders and the executives.
This essay uses both reports from articles as well as data from the CSMAR database. However, for there are thousands of companies in the world and it is impossible to take all of them as a sample. This essay will only focus on the top 10 of the top executives UK stock market as well as the stock market in China, because there are lots of literature on top executive salary in the UK, but the
In the job market, while employees select their employers, employers also select their employees. One of the most important elements that employers might take into consideration is salary. Executive salary could be classified into two groups: the short-term salary and the long-term salary. Short-term salary mainly includes wage, insurance, welfare and bonuses. Stock incentive is one of the modern long-term salary types and the incentive system is used to solve the basic principal-agent relationship between shareholders and managements in modern corporations. Both the short-term salary and long-term salary motivated most of the top executives. This is supported by Firth, Fung, Rui (2007) who claimed that the salaries of top executives are positive correlation to the performance of the company.
However, the profits of shareholders and executives are not always consistent. Shareholders rely on top executives to adopt policies that maximize the value of their shares. But top executives tend to engage in activities that increase their own financial well-being. This problem was noticed by Bede and Means, who also named it as “The Principal-agent Theory” in the 1930s in America. Therefore, shareholders have to design incentive compensation packages and sign contracts with executives to combine their interests. By comparing the payment system of both the top executives in the UK and China, this essay is going to give suggestions on compensation packages management and to make a win-win system for both the shareholders and the executives.
This essay uses both reports from articles as well as data from the CSMAR database. However, for there are thousands of companies in the world and it is impossible to take all of them as a sample. This essay will only focus on the top 10 of the top executives UK stock market as well as the stock market in China, because there are lots of literature on top executive salary in the UK, but the