The Research of Influence of Top Managers Compensation Systems on Companies' Performance in Russia

This paper analyzes the influence of different components of top-managers’ compensation system on the performance of Russian corporations. There is a large volume of published studies concerning the conflict of executives and shareholders that suggest using various types of top-managers’ pay, tied to company performance indicators. However, relatively little formal testing of the effectiveness of these compensation types has taken place, especially in Russia. The data on top-managers’ compensation among 17 Russian corporations from 2008 to 2015 shows that the agency problem in our country is solving mainly in short-term period through key performance indicators (KPI). As regards long-term incentive programs, they are realized only in some companies. In this paper we build several regression models that test the dependence of the company performance (evaluated in market capitalization and ROA) in period t+1 on a number of factors in period t. We take total cash compensation and long-term incentive compensation (binary) as main independent variables. The results of panel regressions with fixed effects reveal no effects of compensation on ROA but positive and significant effects of both cash and long-term incentive compensation on market capitalisation. Thus, this study proved that a compensation scheme of several components tied to the company performance may align the interests of shareholders and top-managers and motivate the latter for maximizing the company value.