Abstract:This research studies the relationship between CEO turnover risks and the pay premium by using the data of A Share public companies listed in Shenzhen and Shanghai Stock Exchanges in the period 2005—2014 as a sample. The conclusion shows that CEO turnover risks is positively correlated with the pay premium. Companies take CEO turnover risk into executive pay system design framework for retaining the high quality human capital of managers and avoiding “adverse selection” or “moral hazard” behavior. CEOs receive a pay premium for the turnover risks. Further study indicates that the more competitive manager market is, the more an executive turnover risk premium is. The guiding role of the human capital theory and the optimal compensation contract theory on CEO pay systems of China s listed companies is confirmed, denying the managerial power hypothesis. Combined with the special institutional background in China, we find that non state owned controlling stake or higher degree of marketization will further enhance the CEO turnover risks premium. This study not only expands the perspective of executive compensation contract theories, but also helps to deeply understand the mechanism of executive compensation design and reveal inherent reasons for the diverse executive compensation levels in different companies.