Using a sample of listed subsidiaries and their parent companies in China, I study top executive compensation and turnover and their relationship to firm performance in business groups in China. The empirical results support the hypothesis that the pay-performance sensitivity of managerial compensation (CEO turnover) in a listed firm is positively (negatively) related to the accounting performance of its parent company. Using related party transactions to proxy for the correlation between the two firms, I find that management compensation in a listed firm is related to the performance of its parent company if related party transactions exist between them. In addition, I find a stronger relationship between the compensation (turnover) in a listed subsidiary and the performance of its parent company when the percentage of common directors and managers are less than median level. This result indicates that the incentive system can be used to align the interests of managers in the listed firm with that of its parent company when the information asymmetry is high and the parent company can not effectively monitor. Using brand name as a proxy for reputation, I find that management compensation and CEO turnover in group firms are more likely to be sensitive to the performance measures in their parent companies if both use the same brand name.