CEO Salary, Private Benefits of Control and Supervision Ability: Analysis based on Disadvantages of Capped Salary Policy

摘要

Some enterprise CEOs(Chief Executive Officer) have to reduce their salaries due to that governments issued capped salary laws and decrees. Academic circles also support the capped salary policy, but they neglect the substitution of the private benefits of control on salaries under different supervision ability of sate-owned enterprise CEOs. Using mathematic models and formulating the CEO's utility function which includes performance and supervision ability, this paper provides a mechanism analysis of the results of capped salary among enterprise CEOs under different supervision ability. The results show that: in the process of the enterprise's sustainable management, CEO's capped salary would lead to the substitution of private benefits of control on salary, which would results in negative incentive effect and decreased performance. The supervision ability level is critical to substitution level. Weakened and unchanged supervision ability has significant effect on the substitution level of private benefits of [关键 词] control on salary which would further decrease the performance. It seems that no matter how supervision ability to change pre and pro salary reduction, capped salary policy would be a failure. It is suggested that the supervision ability on CEOs should be strengthened vigorously at the same time of restricting their salaries in the country like China which has issued the capped salary laws and decrees.