What do we know about China's CEO's? Evidence from across the whole economy

Bryson, Alex and Zhou, Minghai (2012) What do we know about China's CEO's? Evidence from across the whole economy. Centre for Economic Performance occasional papers (31). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

All that we know about the CEO labour market in China comes from studies of public listed companies and state-owned enterprises (SOEs). This paper is the first to examine the operation of the CEO labour market across all sectors of the Chinese economy. We do so using World Bank enterprise data for the first part of the 21st Century. Incentive schemes are commonplace throughout the economy and include contracts linking CEO pay directly to firm performance, annual bonus schemes, the posting of performance bonds, and holding company stock. These incentive mechanisms appear to complement rather than substitute for one another. The elasticity of pay with respect to company performance is one or more in two-fifths of the cases where CEO's have performance contracts, suggesting many face high-powered incentives. CEO's also face a real dismissal threat and financial penalties if they fail to deliver. Incentive contracts are used to attract the most talented executives, as indicated by educational attainment and position in the Communist Party. However, government involvement in the appointment of a CEO reduces the likelihood that the CEO will receive an incentives-based contract, perhaps because governments appoint "bureaucrats" to perform roles which incorporate social and political as well as economic goals. Firms with good corporate governance are more likely to deploy incentive contracts. A picture emerges of a well-functioning labour market for executives in China that exhibits many of the traits common to CEO labour markets in the West.

Item Type:	Monograph (Working Paper)
Official URL:	http://cep.lse.ac.uk/
Additional Information:	© 2012 The Authors
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
JEL classification:	G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc. J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages; Payment Methods M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M12 - Personnel Management M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics > M52 - Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs, seniority issues) O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P31 - Socialist Enterprises and Their Transitions
Date Deposited:	23 Nov 2012 10:29
Last Modified:	11 Dec 2024 19:44
URI:	http://eprints.lse.ac.uk/id/eprint/47500

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