The participation of senior managers in collusion is the necessary link for the tunneling of large shareholders. However, whether executives are willing to collude with large shareholders depends on two important conditions: the proportion of controlling shareholders and executive compensation contracts. There are few researches on tunneling in the present study, which involve collusion of executives and the collusion conditions. Theoretical analysis shows that when the shareholding ratio is low, the controlling power of the large shareholders is not enough, so it is necessary to collude with the executives to achieve tunneling. When the shareholding ratio reaches a certain level, it is not necessary to collude with executives. In order to promote the formation of collusion, the compensation contracts designed by large shareholders weaken the pay-performance sensitivity. Equity incentive makes executives to be shareholders, which provides intrinsic motivation to resist collusion. Subsequently, further empirical test indicates that, when the shareholding ratio is lower, the tunneling behavior needs executives to cooperate for controlling shareholder. In order to realize the collusion behavior, the compensation contract is designed. On the one hand, executives are paid more salary, and the pay-performance sensitivity is weakened, thereby reducing the losses of executive compensation caused by the decline in performance resulting from tunneling. On the other hand, implicit contracts are used to replace explicit contracts, and the executives are given more perks and share the collusion rents through hidden income. In addition, corporate executives’ shareholding cannot suppress the tunneling behavior of large shareholders. Different from previous studies, this paper finds that only in the case of the need for collusion, the large shareholders have the motive for weakening the pay-performance sensitivity.