Does Employment Network Affect Managerial Compensation?——An Empirical Research Based on Social Capital

Abstract

Abstract:

The coexistence of "astronomical salaries" and "zero salaries" for executives in Chinese listed firms has led to extensive discussions about " what determines managerial compensation" among academics and practitioners, while social capital, as an important component of human resource, has received little attention. We theoretically distinguish two kinds of social capital-information capital and control capital that both generate from managerial employment network. Specifically, information capital reflects the capacity of executives in obtaining information, while control capital represents the capacity of executives in grasping influence, power, favor and support. Based on a sample include 2003-2014 Chinese A-share listed companies, we establish an employment network with the whole managerial members as its vertices and using factor analysis to get proxy variables for social capital. By further exploring how social capital function in managerial compensation, we find that:(1) Both kinds of social capital positively affect executive compensation. (2) Control capital decreases the performance sensitivity of compensation while information capital does not present such effect. (3) Control capital significantly decreases non-discretional sensitivity while information capital significantly decreases discretional sensitivity. The conclusions of our research shed light on distinguishing various social capitals and their roles in employment network as well as providing empirical evidence about factors that affect managerial compensation from the perspective of social network.

Key words: social network, social capital, compensation, information advantage, managerial power

Zhang Junrui, Wang Lianghui, Wang Fangjun. Does Employment Network Affect Managerial Compensation?——An Empirical Research Based on Social Capital[J]. , 2018, 30(6): 136-148.

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