A Model of Incentive Mechanism of Independent Directors and Agent Cost Based on Contract Risk

Chinese independent director systems has various defects in effectiveness,the key is the incentive mechanism problem of the independent directors has not yet been solved.The optimal incentive contracts between stockholders and independent directors through mathematic analytic methods is analyzed.When designing the incentive scheme,the stockholders should consider not only consistency of the cost of incentive independent director and his profit but also equilibrium of himself in income and cost.