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Research on CEO Compensation Stickiness of Chinese Listed Companies Empirical Evidence from the Different Situations of Profits and Losses Xiude Chen1, Yulian Peng2, Feiyan Liu3, Jiang Xu4 School of Management, Guangdong University of Technology, Guangzhou Guangdong P.R.China School of Management, Guangzhou College of South China University of Technology, Guangzhou Guangdong P.R.China School of Management, Guangzhou College of South China University of Technology, Guangzhou Guangdong P.R.China School of Management, South China University of Technology, Guangzhou Guangdong P.R.China vinkchen@sina.com; 2yulian.peng@mail.scut.edu.cn; 3liufeiyan@mail.scut.edu.cn; 4jiangxu@mail.scut.edu.cn
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Abstract This paper studies the stickiness of CEO compensation by verifying the existence of asymmetric relations between CEO compensation change and corporate performance in Chinese listed companies during 2006 to 2009, the results show that the marginal increase of CEO compensation in the case of corporate earnings is to be significantly greater than the marginal reduction in the case of corporate deficit, which is tantamount to say that the stickiness of CEO compensation exists. Further research finds that the stickiness of CEO compensation in Chinese listed companies has not yet demonstrated significant time‐ varying trends; but there is sign of increasement. We also find that the stickiness of CEO compensation can be suppressed by improving regional marketization, shareholding system reform and diversified equity of state‐owned companies, supervision of government, media and general public, and matrix control strategy. Keywords CEO Compensation; Performance; Compensation Stickiness; Sensitivity
Introduction Since the global subprime crisis broke out in 2008, operating performance of many listed companies both domestic and overseas declined sharply; but their executives still got “high salaries as rewards”, which caused much dissatisfaction in public and sparked controversy in business world and academia against the topic whether the CEO compensation is strictly linked to corporate performance or not. Principal‐agent theory suggests that when information is asymmetric, it is wise to bind CEO compensation together with corporate performance to motivate managers to operate the company based on value of maximizing company interest. But the reality is far beyond the theoretical expectations, not only the reality of the CEO incentive compensation practice shows more and more compensation chaotic phenomena, such as “pay without performance” and “poor temple with rich monks”, but also the debate in theorists on whether there is a significant correlation between CEO compensation and corporate performance has never stopped. However, as relevant studies go deeper, “CEO compensation stickiness” has increasingly become the focus issues of scholars in recent years. CEO compensation stickiness is that the marginal increase of CEO compensation in case of performance increase is greater than the marginal decline of CEO compensation in case of performance decline, the sensitivity of CEO compensation relative to corporate performance is in a selective asymmetry state. The earliest discussion of CEO compensation stickiness can be traced back to the late 1990s, for example, when Gaver & Gaver (1998) analyzed the performance data of CEO from American top 500 listed companies announced by Forbes, they found that CEO could obtain more compensation in case of corporate’ performance increase, but their compensation didn’t reduce accordingly in case of corporate’ performance decline[1]. The non‐operating income growth pushed up CEO compensation, but non‐operating loss did not cut CEO competition. Non‐symmetry characteristics of sensitivity of performance‐compensation had been found again when Leone, Wu & Zimmerman (2006) inspected the
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relationship of cash compensation and stock returns, finding that the sensitivity of CEO cash compensation in the negative stock returns was twice as its sensitivity in positive stock returns[2]. Jackson, Lopez & Reitenga (2008) found that the positive correlation of CEO compensation and accounting gains no longer existed when corporation got poor performance, and pointed out that the current executive compensation policies in the United States could not cuts CEO’ competition as punishment in underperforming cooperates[3]. Fang Jun‐xiong (2009) was the first one to confirm that executive competition in Chinese listed companies also showed sticky phenomenon; on this basis[4], Fang Jun‐xiong (2011) also analyzed the reasons that competition gap between company executives and ordinary employees in Chinese listed companies was widening in the perspective of the asymmetry of competition changes[5]. Fang explained that compensation stickiness existing in CEO payment not in ordinary staff which resulted in the rate of increase of executive compensation was bigger than the rate of increase of other employees when the company’s performance grew , while, decrease of executive pay was less than the reduction in ordinary employees, when the performance of the company declined. Therefore, CEO compensation stickiness not only impedes the full effectiveness of salary incentives but also becomes an important incentive for widening the pay gap between rich executives and poor staffs. However, Zhang Min et al.(2010)found that Chinese institutional investors played a significant role in the governance of private companies, as demonstrated by its ability to significantly improve the sensitivity of “performance‐salaries” and reduce the compensation stickiness in private companies[6]. It is not difficult to find that the number of the domestic and international research on executive compensation stickiness is very limited, and those literatures mainly concentrate on verification aspect of competition stickiness. On the basis of giving empirical proof of the existence of compensation stickiness, this paper furthers the study by analyzing CEO compensation stickiness trends and proposing governance strategy in terms of choosing CEO (plays key role in executives) as research object, selecting listed companies from Shanghai and Shenzhen A‐share listed companies during 2006 to 2009 as study sample. It can improve existing research in three aspects: Firstly, it’s helpful for drawing more micro‐level research results by choosing CEO rather than the entire executives’ team as particular object for analysis. Secondly, it is the first time to use two different operating results(profits and losses) to test whether there is a significant asymmetry relationship existing between CEO competition and corporate performance, which is a new perspective; Finally, this study analyzes the trends of CEO compensation in Chinese listed companies and explores effective ways to control compensation stickiness on point of view of company Ownership, government control level of state‐owned companies, degree of marketization in the region that companies dominates, the actual manipulator’s control strategy to listed companies, which will spark new inspiration to the executives incentive system in Chinese listed companies. Research Design Sample and Data This paper chooses Shanghai and Shenzhen A‐share listed companies as original sample and filters some data according to the following principles: (1) ST listed companies are excluded; (2) companies without CEO compensation data or lack of relevant research data are excluded; (3) exclude extreme sample in which company the logarithmic change value of CEO compensation is beyond three. Finally, 1031 companies every year are selected as samples. As CEO is the specific research object in this paper, it should be confirmed the way firstly that how to distinguish the different titles (such as general manager, director‐general, president, CEO, chief executive officer) in different companies. Since the executive’s compensation began to reveal to public from 2005, there were some difficulties in collecting CEO competition data. This paper extracted the data of specific duties information of senior management and corresponding remuneration in the report period from the CSMAR, which was an authoritative financial research sample business database in China. The title such as CEO, general manager, president and other similar positions in the duty database were all classified as the same category “CEO”, based on which, a total of five years of CEO compensation data from 2005 to 2009 was sorted out manually. Corporate governance, corporate finance and control variables and other research data required to be used in empirical analysis were derived from Wind database.
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Models and Variables This paper firstly verifies the existence of CEO compensation stickiness, and then analyzes its time‐varying trend. Two groups of empirical models are built: 1)
Model for Verifying Existence of CEO Compensation
Leone (2006) and Fang Jun‐xiong(2009) investigated the asymmetry of CEO compensation change based on two kinds of different situations: increased performance and decreased performance. Similarly but not the same, the model here allows adding loss dummy variable and interaction term of loss and performance to interpreted variables that are used to analyze the asymmetry of the changes of CEO compensation from the different situations of profits and losses; so that, in another point of view to examine the existence of CEO compensation stickiness. The model is set as follows:
pceoit 1 performit 2 D performit ∑ i varit ∑ j control jt it
(1)
Where: in the above formula, interpreted variable pceoit represents change in CEO competition in corporate i in year t; pceoit is measured by the logarithmic value of annual total CEO compensation in year t minus the logarithmic value of annual total CEO compensation in year t‐1; performit represents performance of corporate i in year t; performit is measured by return on total assets (ROA); D loss dummy variable, D equals to 1, when performit is negative otherwise, D equals to 0; varit vector that is composed of other independent variable, which includes dummy variable (dceo) referring to whether CEO has been changed, CEO age profile (ceoage), state‐owned shares (hsg) and asset‐liability ratio (alr); controljt represents the industry control variables and year control variables; , , and are estimated parameters for the model; parameter 1 is the sensitivity coefficients of CEO compensation changes to corporate performance in case of profit situation; 1 2 is the sensitivity coefficients of CEO compensation changes to corporate performance in case of loss situation; what if 1 is significantly smaller than zero, which means the sensitivity coefficients of CEO compensation changes to corporate performance in case of profit situation is much higher than the sensitivity coefficients of CEO compensation changes to corporate performance in case of loss situation, and that the proof of existence of a significant CEO compensation stickiness characteristics. 2)
Model for Time‐varying Trend Tnalysis
Two different methods are used here to verify time‐varying trend of CEO compensation stickiness. In the first method, according to time zone the study sample is divided into two groups: from 2006 to 2007 and from 2008 to 2009 in order to find out whether there are differences in the CEO compensation stickiness between two time zone groups. In second method, it’s first assumed that estimated parameters of the cross‐term D performit in CEO compensation stickiness model will change over time, of which value is decided by function 2 Dyear including time variables, where: Dyear is the time variable which increases with the increase of the year (2006 to 2009, value of Dyear equals to 0,1,2,3); 2 Dyear the coefficient of CEO compensation stickiness; coefficient of variation of CEO compensation stickiness over time. What if the estimate value of is significantly different from zero, it indicates that there is a significant time‐varying trend in CEO compensation stickiness; otherwise, no significant time varying trend. pceoit 1 performit ( 2 Dyear ) D performit ∑ i varit ∑ j control jt it
(2)
In addition, it could be convenient to compare compensation stickiness differences between CEO’ personal and executives team to achieve the effect of robustness tests to some extent, by using average pay of all executives logarithmic growth (paveit) as an alternative form of CEO remuneration changes (pceoit) to repeat the above empirical model verification.
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Results and Analysis Descriptive Statistics and Analysis The descriptive statistics results of main research variables shows that(Table 1): (1)Both average changes in CEO salary and average salary changes of executives team are positive (respectively 0.16 and 0.13), and the former is significantly larger than the latter, which means during the study period both the CEO salary and average salary of executives team have increased in different magnitude, and CEO compensation gain bigger margins; (2) Mean value of perform (corporate performance) is 2.86, which indicates that the average performance of the sample companies during the study period is 2.86%; in other words, companies as a whole is in the state of profitable, which to some extent becomes a reasonable explanation for CEO compensation increase; (3) CEO‐change dummy variable with mean value 0.20, indicates about 20.00% of CEO in the sample companies changed(showed in Tab.1). TABLE 1 THE DESCRIPTIVE STATISTICS FOR THE MAIN RESEARCH VARIABLES
Variables pceo pave perform dceo lna alr hsg ageceo
Obs 4124 4124 4124 4124 4124 4124 4124 4124
Mean 0.16 0.13 2.86 0.20 21.53 52.20 0.21 46.57
Median 0.08 0.10 3.08 0.00 21.47 52.96 0.13 46.00
Sd 0.76 0.36 101.99 0.40 1.24 139.14 0.22 6.26
Max 3.00 3.79 99.38 1.00 28.36 114.82 0.97 72.00
Min ‐3.00 ‐2.49 ‐99.86 0.00 12.31 1.45 0.00 28.00
The Existence of CEO Compensation Stickiness The empirical test results of existence of CEO compensation stickiness show that(Table 2): (1) the regression coefficients of company performance variables are significantly positive, no matter in CEO salary change model or in average change of salary in executives team model; what is more, the sensitivity of changes in CEO salaries with corporate performance change is stronger than in entire executives team. (2) The regression coefficients of the dummy variable D that measures company loss are all negative, but these results in CEO competition changes model do not pass the significance test, which together indicates that when the business is in a state of loss, CEO salary increases may be subjected to some degree of inhibition. (3) In two test models, regression coefficient of dummy variables and cross‐term of corporate performance indicators D×perform are ‐0.009 and ‐0.004 respectively, and pass the 1% significance level testing. The results of this experience illustrate the meaning inherent in the economy: the marginal increase in CEO remuneration when corporation which is in case of earnings is significantly greater than the marginal decrease in CEO remuneration when company is suffering loss, which indeed verifies the CEO compensation stickiness existing in Chinese listed companies. (4) further analysis reveals that the regression coefficient of corporate performance to CEO competition changes is 0.008 when corporate performance variables is positive or business is profitable; but when business suffers loss, the regression coefficient tends to be 0.008+ (‐0.009) = ‐0.001, which means when corporate gets profit, per unit increase in business performance leads to 0.008 units expectation increase in logarithmic value of CEO salary change; however, when companies are in the case of loss‐making, per unit decreased in corporate performance expects no decrease but increase of 0.001 units in logarithmic value of CEO salary change. In a word, the salary of CEO in listed company grows with corporate performance growth, but won’t decline as the corporate performance decline. In addition, we are concerned that test results of the average competition changes of executives team model are consistent with the previous modelʹs conclusions, but also reflect the nuances which display in specific aspects: when the corporate performance variables are positive, the regression coefficient of business performance to changes in average competition of senior executives is 0.004; while corporate performance variable is negative, the regression coefficient of the business performance variables to changes in average competition of senior executives is 0.004 + (‐0.004) = 0.000. It is suggested that when corporate gets profit, per unit increase in business performance leads to 0.004 units expectation increase in logarithmic value of CEO average competition of senior executives change; however, when companies is in the case of loss‐making, per unit decreased in corporate performance expects no decrease in logarithmic value of average competition of senior executives change. Therefore, comparing the results of the regression coefficients from two models, significant compensation stickiness phenomenon can be found in both
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average competition of senior executives and CEO salary, but the former one is much weaker in degree than the latter one. TABLE 2 THE DESCRIPTIVE STATISTICS FOR THE MAIN RESEARCH VARIABLES
Variables Constant perform D D×perform dceo lna alr ageceo hsg Year Industry R2
The Varying Models for CEO Compensation Parameter Estimation T Statistic 0.405 1.736** 0.008 4.439*** ‐0.038 ‐0.924 ‐0.009 ‐3.201*** ‐0.412 ‐15.309*** ‐0.004 ‐0.397 0.000 ‐0.909 ‐0.001 ‐0.821 0.034 0.657 Control Control 0.072
The Varying Models for Average Compensation of Executives Parameter Estimation T Statistic 0.109 1.938* 0.004 3.667*** ‐0.075 ‐3.491*** ‐0.004 ‐2.702*** ‐0.064 ‐4.501*** 0.002 0.480 0.000 ‐0.321 0.000 0.098 0.061 2.217** Control Control 0.029
TABLE 3 THE TIME‐VARYING TRENDS TEST RESULTS OF CEO COMPENSATION STICKINESS IN CHINAʹS LISTED COMPANIES
Variables Constant perform D D×perform θ dceo lna alr ageceo hsg Industry R2
2006‐2007 Parameter Estimation ‐0.021 0.009 0.013 ‐0.008 ‐ ‐0.476 0.009 ‐0.000 0.002 ‐0.113 Control 0.077
t statistic ‐0.060 3.111*** 0.189 ‐1.881* ‐ ‐11.706*** 0.615 ‐0.532 0.820 ‐1.473
2008‐2009 Parameter Estimation 0.83 0.008 ‐0.071 ‐0.009 ‐ ‐0.341 ‐0.015 ‐0.000 ‐0.005 0.201 Control 0.065
T Statistic 2.955*** 3.421*** ‐1.466 ‐2.721*** ‐ ‐9.639*** ‐1.247 ‐1.508 ‐2.356** 2.979***
2006‐2009 Parameter Estimation T Statistic 0.405 1.909** 0.008 4.439*** ‐0.038 ‐0.928 ‐0.008 ‐2.481** ‐0.000 ‐0.133 ‐0.412 ‐15.308*** ‐0.004 ‐0.393 ‐0.000 ‐0.908 ‐0.001 ‐0.819 0.034 0.648 Control 0.072
Time‐varying Trend Analysis of CEO Compensation Stickiness Adopted by time‐interval‐grouped regression analysis and empirical model (2), this paper verifies whether CEO compensation stickiness has a certain time‐varying trend (e.g. increased or decreased changes in evolution over time). Table 3 shows the results of time‐varying trends test of CEO compensation stickiness in Chinese listed companies from 2006 to 2009. The CEO compensation stickiness significantly exists in the 2006‐2007 and 2008‐2009 groups which are divided by time interval: in the first period, the sensitivity coefficients of CEO competition‐ performance is 0.009 under the condition of profits, but the sensitivity coefficient of CEO competition‐performance is 0.009 ‐ 0.008 = 0.001 under the condition of corporate losses; in the second period, the sensitivity coefficient of CEO competition‐performance is 0.008 and 0.008 ‐ 0.009 = ‐0.001 respectively under the condition of profits or losses. Therefore, merely judging from the value of sensitivity coefficients, the CEO compensation stickiness in the second period seems to have enhanced trend. Further test results from the time‐varying trend model support the conclusion that CEO compensation stickiness exists all the same. As the parameter θ which is used to measure time‐varying trend of CEO compensation stickiness is very close to zero and is not statistically significant, it indicates that there is no abundant evidence of the existence of time‐varying trend in the CEO compensation stickiness in listed company in China. But the test results in time interval paragraph may show signs of increased in compensation stickiness should be gotten enough attention. Based on variable results, it can be seen that on this experience, the time‐varying trend of CEO compensation stickiness is not significant, but the CEO compensation stickiness behavior in Chinaʹs listed companies CEO does not get effective governance and mitigation over time, instead, even shows signs of intensified. The possible reasons for this maybe: firstly, as time goes, internal governance mechanisms of listed companies as well as external institutional environment could be improved to a certain extent, but the changes in internal and external
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governance mechanisms in short term are very limited, the results of which led to the external widely pay more attention to the important measure index to validity of the executives performance contract——sensitivity remuneration‐performance may have been enhanced to a certain extent. However, it is not enough to identify executive’s concealed self‐interested behavior (e.g. CEO compensation stickiness) effectively and produce significant governance effect. Secondly, under background of relevant supporting system is not perfect or has not been established, the establishment of corporate executives performance‐based competition system to a certain extent, may put on the coat of legitimate rights of rent‐seeking behavior by managers, which will be able to explain that on one hand the public, news media and government regulators constantly question the corporate executive competition issue, but on the other hand executives in listed companies still get high competition rewards “justifiably” when company earns profit, still getting high compensation without competition cut “punishment” when the company is facing a loss. Governance Strategy of CEO Compensation Stickiness in Chinese Listed Companies CEO compensation stickiness as a typical asymmetry phenomenon of competition and performance will adversely affect the validity of the remuneration of contract. Earlier studies have demonstrated that CEO compensation stickiness did exist in Chinaʹs listed companies, and this phenomenon has not been mitigated effectively as time goes. Therefore, it is necessary to discuss governance strategy to CEO compensation stickiness issue in Chinaʹs listed companies. With the experience of existing relevant clues: (1) The existence of multi‐objective blurs the causal relationship between operating performance of state‐owned companies and effort & talent of business executives, thus weakening the effectiveness of performance‐based competition systems (Bai, C. and L. C. Xu.,2005; Bai C. Lu J.and Tao Z.,2006; Chen Dong‐hua et al, 2005)[7,8,9]; while private companies tend to have a better and more effective governance of the companyʹs executive compensation system (Firth et al, 2006; Chen et al.,2011)[10,11]; (2) Zhang et al.(2013), Xin Qing‐quan and Tan Wei‐qiang (2009) found that the control level of government would affect the market forces ability of shaping the state executive salary contract[12,13]; Fang Jun‐xiong (2009) found that the nature of equity was an important corporate governance factor affecting executive compensation stickiness; Quan Xiao‐ feng, Wu Shi‐nong and Wen Fan (2010) considered there were differences between the central state‐owned companies and local state‐owned companies in terms of institutional constraints, public pressure and the degree of government intervention[4,13]. In contrast, the abuse of power in central corporate executives faced higher “angry social costs”, which suppressed the motivation to seek dominant private monetary gain. (3) Chen Xiu‐de (2012) found that effects of management power in Chinese listed companies executive compensation contract showed a gradual weakening trend in the market process[14]; (4) Based on Karuna, C.(2007), La Porta et al.(1999), Claessens and Fan(2002) and Faccio and Lang(2002), Quan Xiao‐feng, Wu Shi‐nong and Wen Fan (2010) and Liang Tong‐ying, Feng Li and Chen Xiu‐de(2012) pointed out that the control strategy of ultimate controller to the target companyʹs (such as vertical control and matrix control, etc.) could affect the structure and effectiveness of executive compensation contracts to some extent[15‐20]. Based on the above empirical literature, this paper used grouped testing analysis method to explore management strategies to CEO compensation stickiness mainly from four perspectives: company ownership, government control level of state‐owned companies, degree of regional marketization in the companies dominated the actual manipulator’s control strategy to listed companies. Viewing results of the grouped testing of governance strategies to CEO compensation stickiness are reported in Table 4, the correlation coefficient of changes in CEO salaries to corporate performance is significant positive basically, which indicates that Chinese listed companies have established performance‐based executive compensation incentives mechanism basically; more importantly, the test results show the company Ownership, government control level, degree of regional marketization, and the actual manipulator’s control strategies have a significant impact on CEO compensation sticky characteristics. Applying sample data from state‐owned companies, local state‐owned companies, the low degree of marketization companies and vertical controlled groups results in the regression coefficient of D × perform are all significantly negative, which indicates CEO compensation stickiness phenomena exists significantly in these four groups of sample companies. It’s interesting to find that the regression coefficients of D × perform are all insignificant when using the data from private companies, the central state‐owned companies, and the high degree of marketization companies and the matrix controlled group, which indicates that there is no significant sticky behavior of CEO compensation in the four groups of samples companies.
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Summary test results suggest that the promotion of joint‐stock reform of state‐owned companies and state‐owned companies to promote equity diversification, strengthening government’s authorities, enhancing the supervision of media and public on the management compensation in state‐owned company, promoting macro‐regional marketization reforms, transferring control strategies of ultimate controller from vertical control type with more agent levels to matrix control strategies with more control chain and other initiatives could play a significant role in CEO compensation stickiness governance. TABLE 4 THE EMPIRICAL RESULTS OF CEO COMPENSATION STICKINESS BEHAVIOR’S GOVERNANCE STRATEGY
Ownership Variables Constant perform D D×perform dceo lna alr ageceo hsg Industry Year R2
Control Hierarchical
State
Private
Central Soes
Local Soes
‐0.100 (‐0.373) 0.004* (1.940) 0.012 (0.220) ‐0.004* (‐1.659) 0.558*** (9.853) ‐0.002 (‐0.138) ‐0.000 (‐0.024) ‐0.005** (‐2.310) 0.044 (0.669) Control Control 0.110
‐0.341 (‐0.878) 0.000*** (8.095) 0.145 (1.298) ‐0.011 (‐1.469) 0.334*** (4.671) ‐0.004 (‐0.220) ‐0.000*** (‐3.617) 0.003 (1.405) 0.042 (0.284) Control Control 0.066
‐0.740 (‐1.354) 0.008*** (3.815) ‐0.121 (‐0.762) 0.012 (0.394) 0.625*** (5.699) 0.024 (1.189) ‐0.001 (‐0.353) ‐0.005 (‐1.092) 0.172 (1.339) Control Control 0.128
0.101 (0.318) 0.007*** (8.998) 0.029 (0.474) ‐0.004** (‐2.022) 0.538*** (8.130) ‐0.009 (‐0.685) ‐0.000 (‐0.322) ‐0.005** (‐2.333) 0.026 (0.336) Control Control 0.115
Market‐Oriented Model High Low Marketization Marketization ‐0.688** 0.207 (‐2.361) (0.673) 0.001*** 0.002 (3.838) (1.317) ‐0.076 0.099* (‐0.923) (1.747) 0.005 ‐0.003* (0.694) (‐1.916) 0.538*** 0.425*** (8.571) (6.610) 0.018 ‐0.020 (1.433) (‐1.499) ‐0.001*** ‐0.000** (‐3.465) (‐2.499) ‐0.002 ‐0.001 (‐0.870) (‐0.614) 0.071 ‐0.004 (1.172) (‐0.045) Control Control Control Control 0.115 0.076
Control Strategy Vertical Matrix Control Control 0.158 ‐0.001 (0.310) (‐0.005) 0.008* 0.000*** (1.858) (6.388) 0.041 0.011 (0.399) (0.210) ‐0.008* ‐0.002 (‐1.762) (‐0.401) 0.392*** 0.396*** (2.714) (10.127) ‐0.004 ‐0.009 (‐0.166) (‐0.899) 0.001* ‐0.000*** (1.834) (‐6.788) ‐0.009* ‐0.002 (‐1.712) (‐1.274) 0.023 0.021 (0.152) (0.440) Control Control Control Control 0.113 0.091
Conclusions This paper studies the stickiness of CEO compensation by verifying the existence of asymmetric relations between CEO compensation change and corporate performance in Chinese listed companies during 2006 to 2009, the results show that the marginal increase of CEO compensation in the case of corporate earnings to be significantly greater than the marginal reduction in the case of corporate deficit, which is tantamount to say that the stickiness of CEO compensation exists.On this basis, this paper also focuses on analyzing CEO compensation stickiness trends and proposing governance strategy. Empirical evidence shows that the stickiness of CEO compensation in Chinese listed companies has not yet demonstrated significant time‐varying trends; but there is sign of increase. In other words, CEO compensation stickiness behavior in Chinese listed companies has not been mitigated effectively as time goes by but may get intensified gradually. Based on empirical test, the paper suggested that promoting macro‐regional market‐oriented reforms to higher degree of marketization, promoting joint‐stock reform and equity diversification of state‐owned companies, strengthening government’s authorities, enhancing the supervision of media and public on the management compensation in state‐owned company, transferring control strategies of ultimate controller from vertical control type with more agent levels to matrix control strategies with more control chain and other initiatives could play a significant role in CEO compensation stickiness governance. ACKNOWLEDGMENT
The authors acknowledge financial support from the National Natural Science Foundation of China (71102052), the Postdoctoral Science Foundation of China (2013M531827), the Philosophy and Social Science Planning Project of Guangdong Province (GD13YGL01) and the Department of Education funding projects of Guangdong Province (2013WYM_0014).
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The authors would like to offer their most sincere thanks to the anonymous reviewers and the editors, for their insightful comments. The authors would take full responsibility for the paper. REFERENCES
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