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Board Characteristics corporate performance

Author: PengJia From: www.yourpaper.net Posted: 2009-12-29 14:50:12 Read:
[Abstract] The board of directors is the core of corporate governance, Board Characteristics widespread concern is how to affect the company's performance. In this paper, the size of the board, the chairman and CEO the right to set the state as well as the annual remuneration of the company's performance.
[Key words] Board Characteristics corporate performance annual remuneration

The Board of Directors is representative of the interests of shareholders, one of the most important subjects has significant matters of the company's decision-making power, supervision, constraints, motivating managers. The good board be able to select and motivate an outstanding management team for the company to achieve a good performance. The Board characteristics can be described in many ways, set the state as well as the annual remuneration of the size of the board, chairman and CEO of the two roles of these three to start research.

Board Characteristics Overview

Eigenvalue problem on the board of directors, in East Sense (2004) will be expressed as: the independence characteristics, behavioral characteristics, motivating feature, stability characteristics. The independence of the main features for the size of the board, the proportion of inside directors and independent directors, set the status of the two roles of chairman and chief administrative officer (CEO), the sub-committee set. Board size refers to the number of directors of the Board of Directors of the Company, and too much of the board of directors can not play the best effect. In a certain sense, the most important factor to determine the effectiveness of the Board is that it is independent of the level of chief administrative officer. Common Law countries, the shares of the company's board of directors usually have a certain proportion of independent outside directors. Because the internal directors as independent directors Unlike directly subject to the controlling shareholder and the company's management, which is conducive to the independent judgment of the Board of Directors of the company's affairs. Set the status of the two roles of chairman and chief administrative officer, chairman and chief administrative officer of the two positions on the extent to be separated, it usually reflects the independence of the board of directors of the Company and the execution level space of freedom to be creative, it is about the internal governance structure of the company is an extremely important and highly visible aspects. The sub-committee in the implementation of the single-layer Committee of the Company's Board of Directors in.
The behavioral characteristics mainly as the annual number of meetings with non-normal number of meetings. Incentive characterized the status of the company directors practiced incentives, including annual remuneration, shareholding proportion, bonuses, stock options, pension plans, the more common the first three listed companies in China. The stability characteristics changes frequently refers to a member of the board of directors of a company, which is mainly manifested in changes in the size of the board and change of board members in the case of the same size of the board, which usually effectively reflect the company's governance issues and performance status . This article only to study the size of the board, the chairman and CEO settings, several aspects of the annual compensation to company performance.

Second, the Board has the characteristics of the company's performance

Size of the board and corporate performance the 20th century, 90 years ago, many studies support the large scale of the Board that the large-scale Board decision-making consultation of the multi-angle, to help enterprises to obtain the necessary resources to establish a good corporate external image, lower control the possibility of the Board of Directors. However, Lipton and Lorsch (1992) pointed out that the large scale of the ills of the Board of Directors: Although the Board's oversight capacity increased with the increase in the number of directors, but the coordination and organization of the process of the loss will exceed the benefits of the director of the increase in the number of . Or, the directors increase in the number of benefits and can not be offset by the cost of the resulting decision hesitated and drag. Yermack (1996) used by the U.S. Fortune 500 companies as the study sample, control other variables, the company Tobin Q value negatively correlated with the size of the board. Eisenberg et al (1998) with the Finnish small and medium-sized companies as sample, again confirmed Yermack (1996) results, that related to the scale of negative Tobin Q value of the Board of Directors of the Company. However, Bhagat and Black (1998) found that the relationship between the size of the board and corporate performance depends on the selection of performance indicators, with different performance indicators may get a different conclusion. Some scholars from other angles, the governance of the board of directors of the small-scale efficiency. Summarizes the results of the current research, theory and market participants seem to prefer small-scale board.
Sun Yongxiang and Chapter finance (2000) to 1998, the Shanghai Stock Exchange and Shenzhen Stock Exchange 517 A-share listed companies in China's capital market, as the research sample found negative correlation between board size and corporate performance of listed companies in China, that the Board of Directors the smaller the company, the better the performance. However, in East Chi, pool Guohong (2004), with the average return on net assets and the average main business profit margins as the company performance indicators, regression analysis of listed companies in China in 2000, statistics on the size of the board and corporate performance, results show that the size of the board of directors and corporate performance showed significant inverted U-shaped quadratic relationship. Li Bin, Gao Liang Liang (2005) to private enterprises listed companies as samples and found no significant correlation between board size and corporate performance. 2, chairman and CEO of setting corporate performance
There is a fierce debate about whether the chairman and CEO of the separation of ownership and theorists. Party believes that the risk characteristics of the operating activities and to reduce the risk for the main task of the mission determines the inevitable to give managers a considerable degree of random right of disposal, so that the business environment remains competitive coordination; other is that as an enterprise contract relevant stakeholders, especially the interests of the shareholders should be respected and protected, over-expansion of the two hats-one will make the general manager and other senior executives, but also undermine the effectiveness of the Board to oversee the senior management personnel, and thus that the Board of Directors with a high degree of independence, to play an effective oversight beneficial to the general manager to strengthen the relevant stakeholders, especially the attention of the shareholders. For a description of the structural characteristics of leadership, domestic and foreign scholars have different practices. Chinese scholars have a representative view, the reality in China, there is an intermediate state, that the general manager and deputy chairman or director positions unity.
Pi and Timme in 1993, the banking sector as a sample study, they found that the post of chairman and CEO separate company relatively lower cost, higher return on assets. Wushu Kun (2002) systematic study of the structural problems of the leadership of China's listed companies as corporate performance indicators ROE, found two hats-one will reduce corporate performance. But also from the legal perspective, said the board of directors headed the entire board of directors responsible to shareholders, and the Board is responsible for the company's management team, the relationship between the Board and the management team is the decision-making and implementation, supervision and supervised relationship. When the work of the management team can not be satisfied so that the Board, the Board is necessary to lift the CEO duties. Conversely, CEO also particularly want to "capture" the board of directors, in order to stabilize their own work. So, in order to prevent the CEO to control the board as a whole should not be held by the company's chairman CEO, or the CEO of the company can not do the chairman. The company should take two jobs separate settings.
Annual remuneration and company performance
A key incentive mechanism of the directors of the coordination of interests between the board of directors and shareholders of the Group. The annual remuneration of directors and corporate performance is closely related to beneficial to provide enough power for the directors.
Merhebi Rachel, Pattendend et al (2006) found that there is a strong correlation between CEO compensation and corporate performance, and reward strong performance sensitivity.
Chen Yan (2006) deep, listed companies in Shanghai and Shenzhen in 2004 as a sample study of internal corporate governance mechanism for the compensation of the Company's management, the results show a positive correlation between company performance and Executive Compensation, the correlation coefficient is significantly is 1%. Hu Ming in the "corporate governance" The results show that, regardless of the performance of the company is to measure return on net assets or earnings per share or the Tobin Q, annual total compensation of all the members of the Board of Directors and the performance of listed companies a significant positive correlation. Description annual remuneration incentives for these companies is still not perfect, there may be an unreasonable phenomenon. Usually as people understand when information asymmetry between shareholders and the board of directors of the company, shareholders will be formed with the Board the remuneration and performance of the contract, to enhance the enthusiasm of the directors of the regulation of the company managers, so that their own wealth maximization . Therefore, for the self-interest of directors, he will seek to improve the company's performance to improve their annual remuneration.
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