CEO compensation components and company performance

Abstract

Nowadays, the principal-agent relationship has become the mainstream of the management system of listed companies. Modern corporate governance theory believes that principals and agents have different economic interests and the problem of asymmetric information. Therefore, agency cost is inevitable. Most corporate executives are risk-averse, and corporate shareholders are risk neutral. How to give full play to the role of professional managers and improve the company's performance has become an urgent problem in the capital market. Linking CEO compensation with company performance is not only conducive to mobilizing the executive's operating enthusiasm, but also to promote the interests of agents and principals to be consistent, and it also increases the incentives and constraints for agents. Therefore, the establishment and improvement of salary composition is very important to solve the agency problem.This research will further study the relationship between CEO compensation and company performance, the impact of compensation components on company performance and how to make the compensation system more effectively linked to company performance.