What Is a Remuneration Committee?

The remuneration committee is a special committee on the company's board of directors. It is mainly responsible for making recommendations on the company's senior management's remuneration policy and system design, specifically reviewing the remuneration structure and level of general managers, and formulating incentive plans such as bonuses and options for managers. ^[1]

Remuneration Committee

How to design effective managers since Berle and Means (1932) proposed the "Berle-Means" proposition

Supervisors are found in the Company Law and the

1. The remuneration committee shall be based on the main scope, responsibilities, importance of management positions of directors and senior management personnel and their

The remuneration committee meets at least twice a year. All members must be notified seven days before the meeting. The meeting is chaired by the chairperson. If the chairperson is unable to attend, he can appoint another member (requires

From the existing research, there are three main theories that support the establishment of compensation committees.

Guide and promote listed companies to set up remuneration committees

Among listed companies, there are not many companies with compensation committees, and their understanding of the compensation committee system is not comprehensive. Therefore, as the regulatory body of listed companies, the China Securities Regulatory Commission should follow the SEC's approach and require listed companies to establish remuneration committees, and disclose the composition, functions, and operation information of remuneration committees in listed company annual reports to promote the remuneration committee system Build and improve.

Standardize and improve the salary committee system

Promote the efficient and effective operation of the compensation committee. Although the Securities and Futures Commission suggested that listed companies can set up remuneration committees, it did not make systematic provisions on their specific functions and operating procedures. As a result, although some listed companies in China have established remuneration committees, they lack effective operating mechanisms. It does not actually play a significant role in corporate governance. In the future, it is necessary to strengthen the standardization of the relevant system of the remuneration committee and provide reference standards for the effective operation of the remuneration committee.

Improve corporate governance

Improving the independence of the remuneration committee Effective corporate governance checks and balances are the internal basis for the implementation of the remuneration committee system. However, the relatively concentrated equity of listed companies, and the phenomenon of cross-boarding of the board of directors and management is more common, which leads to the influence of manager power on organizational decisions, and the independence of the compensation committee is too small to play a role.

Therefore, only by promoting the reform of the corporate governance mechanism can we fundamentally check the expansion of manager's power and realize the independent and effective operation of the compensation committee.

Establish a professional market for independent directors

Promote the professionalization of independent directors Due to the low level of professionalization of independent directors in China, the professional skills and monitoring capabilities of independent directors are generally weak, and it is difficult to exercise their independent supervision responsibilities in their work, which also leads to the compensation mainly composed of independent directors. It is difficult for the committee to function.

Therefore, it is necessary to establish a professional market for independent directors, promote independent directors to improve their supervision skills through the market competition of independent directors, and achieve restrictions on independent directors through the reputation incentive system of the independent directors market, and promote the establishment and development of China's remuneration committee system.