Briefly explain your views on executive compensation. Do you think it’s excessive or is it appropriate? Why or why not?

In some cases, I think executive pay is too high. As noted in the PBS video, in 2002, the ratio of CEO pay to average worker pay was 500:1. CEO pay is too high due to market competition, not according to the value that CEO brings to the company. Employees are typically paid based on their job description and responsibilities and skills, while CEO pay is set based on market research at other companies. This seems very unreasonable. So in the market context, I thought CEO pay was too high and did not reflect the value that the CEO brought to the company.

However, CEO pay doesn’t come entirely from base salary, and their pay is tied to the growth of the stock market rather than the pay of CEOs at other companies. I think excessive performance-based executive pay is justified and it is appropriate that senior executives receive more performance rewards to improve the company’s performance. This is an incentive for the company’s executives and a way to retain talent.

How would you change executive compensation? What controls would you put in place? 

I don’t think much needs to change if executive pay is based on performance. To some extent, to control executive compensation’s excessive growth, we can convert the compensation into long-term benefits, such as retirement fund and housing fund. If executive pay is based on market competition, companies need to consider moving to a performance-based pay system. Specifically, reduce the base salary of CEOs and convert a portion of fixed pay into performance-based rewards. This can motivate executives to work hard to improve company performance.

What issues might arise if you decreased (or limited) executive compensation?

I think there are two negative effects of reducing or limiting executive pay. First of all, the company will lose its competitiveness in the recruitment market. Unattractive salaries will make it difficult for the company to find talented managers in the talent market, which will affect the company’s future development. Second, reducing executive compensation will reduce the performance of the company’s top executives. Reducing the pay pass seems to be more like a kind of punishment. The executive loses part of the benefits without any work mistakes, which will lead to the executive’s work enthusiasm and even resignation.

Which component of compensation do you think is most essential to recruit executives and motivate them to lead companies toward competitive advantage? Why?

I think the equity option is the most effective way. First of all, when hiring executives, giving them equity makes them less afraid of being fired and increases their emotional attachment to the company. Secondly, the remuneration that executives get through equity is closely related to the company’s development and earnings, which will motivate the executives to strive to improve the company’s profits and promote the company’s growth to gain more benefits.