Pride and prejudice: Can CEO still enhance compensation under committees? -Evidence from Chinas State-Owned Enterprises

Abstract

Abstract

How can a CEO still enhance his or her compensation under the supervision of committees in Chinas state-owned enterprises? In order to have a better management of CEOs compensation, many of the firms often set up compensation committees and audit committees.

However, in Chinas state-owned enterprises, it is quite common that many of the committee members take overlap between the two committees, meanwhile, the CEOs also overlap in committees and nevertheless, even in charge himself or herself as a board director. It seems that a CEO may still have means and attempt to raise his or her compensation under such committees.

This study focuses on the influence of the overlap of committee members and CEOs compensation

and the influence of CEOs overlap and the CEOs compensation.

The study has found that 1) when committees members take overlap between compensation committees and audit committee, the CEOs compensation can get lowered. Thus, the overlap of committee members does have influence in manage CEOs compensation. 2) When CEOs overlap in compensation committee, the CEOs compensation gets lowered. 3) When a CEO takes overlap tenure as a board director himself, his or her compensation gets enhanced, which indicates that CEO compensation can still remain at high level, despite of committees supervision.

Finally, it is proved that even committees are set up and committee members overlap across, a CEO is still likely to circumvent control and attempt to maximize his or her compensation.