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Formation mechanism of listed company equity incentives

Author: NiuXiangLi¡¡ChenPing From: www.yourpaper.net Posted: 2009-08-07 03:22:51 Read:
[Paper Keywords] equity incentive incentive model listed companies
[Abstract] This article first the equity incentives maturity evaluation criteria summarized, after analysis of their effectiveness.

First, the issues raised
With the continuous development of China's modern enterprise system, corporate ownership and the right to operate more and more separated, increasingly serious conflicts of principal and agent. Equity incentives is the lack of an effective common interests between the principal and agent, and put forward a set of long-term incentive system for operators. However, at this stage of the legal environment and internal environment does not yet have the conditions for the implementation of equity incentive, and inadequate corporate governance structure, real managers of the market has not yet formed, equity incentive effect is not ideal. Analysis of the formation mechanism of the China's equity incentive mechanism has great practical significance.
Equity incentive mechanism of the formation mechanism
The concept of incentive stock options. Equity incentive listed companies in the stock or other equity interests issued by the Company granted to the executives of the company, property rights is constrained, to motivate executives from the perspective of business owners work diligently to maximize enterprise value and shareholder wealth maximize and improve corporate governance and promote long-term development of the company. Equity incentive is an effective management approach to stimulate people's enthusiasm and creativity.
Equity incentive mechanism evaluation criteria. With the growing number of cases of domestic and foreign equity incentive, equity incentive not only in theory but also in practice become the focus, scholars are accustomed to the study of the human capital theory and principal-agent theory based equity incentive measure of equity incentives maturity evaluation criteria are mainly the following four:
(1) whether the reaction to the combination of human capital and non-human capital in the corporate contract. The modern theory of the firm is generally believed that the enterprise is composed by different elements of the owner, namely, human capital and non-human capital owners to enter into a contract between the establishment of a cooperative organization. However, due to the uncertainty of the existence and the unique nature of the human capital, such contracts are not complete. It is not an accurate description of both the rights and responsibilities of the state and each state may be implemented in all future transactions. This requires that the parties to the contract additional provisions in the contract. In this case, the residual claims and residual control arrangement is very important. Enterprise contract is different from the general market contracts, the key lies in the use of human capital is included in the corporate contract. (2) whether the motives reflect the traditional enterprise and modern capital wage labor. In the case of management ability is private information, the market to poor entrepreneurs and less personal wealth as lower operating capacity signal but poor entrepreneurs than wealthy entrepreneurs more business, but still wealthy entrepreneurs selected by the market. This is the the classical enterprise into one of the entrepreneurs and capitalists reason, classical enterprise origin of the capital-wage labor. Capital constraint is a double-edged sword, and it likely will have the ability but lack of capital is excluded from the ranks of entrepreneurs outside, and those who only have the capital rather than have the capability but only factor prices. In this case, the opportunities for cooperation between the people of low capacity and high capital, the result is a high capacity to become managers, engaged in business activities. High capital become shareholding, responsible for the selection of managers, and bear the risk of managers operating decisions. (3) whether it reflects the corresponding enterprise residual claim and residual control rights. The joint-stock company is a the composite contract between financial capital and human capital, human capital status has risen sharply due to the separation of the ownership and operation of a modern enterprise, the relative decline in the importance of financial capital. How to reflect the changes in the structure of the modern enterprise property, its residual claim and residual control of corresponding specific principles, it can be said that the "risk takers and risk makers corresponding.
The reason why the financial capital owners have residual claims: First, the financial capital owners in accordance with their information advantage of labor, hired labor, assumed the risk of employment; Second, the financial capital owners become principals, we need to have some control "to supervise the agent. According to the principle of optimal ownership arrangements, the financial capital owners of the enterprise's residual claim. The manager The reason has a residual claim on the enterprise: First, the relative scarcity of human resources. Human capital to ensure that the owners increase the value and expansion of the non-human capital; Second, under the modern enterprise system, the administrator has the right to decide what to do and how to do it, the right to decide how to generate surplus produce much surplus; accompanied by a certain degree of risk in his decision-making, the maker of the risk corresponding to this, he must take responsibility for its manufacturing risk, of course, also has its manufacturing profit sharing rights; once again, due to operating activities of the importance and difficulty of supervision, in order to minimize agency costs, it is necessary to establish a surplus sharing system between the financial owners of capital and human capital owners. (4) whether excluding the incomplete nature of the traditional salary. Not a completely traditional pay system after the settlement in the form. Due to incomplete information, the market signal distortions factors, the labor market is not possible to accurately adjust the wages of managers. Moreover, the wage adjustment is a complex process, and many other factors by the social environment, social customs, and corporate culture. Practice has proved that the traditional pay system gives managers the marginal revenue is far less than the compensation of its marginal contribution and commitment to the marginal responsibility. The incomplete features make up the traditional pay equity incentive has been widely used as a relatively complete form of payment.
3 the equity incentives effectiveness formation mechanism. Equity incentive mechanism to stimulate the correct behavior of the managers, so that they increase efforts for the performance of the company. The mechanism of its formation refers to the process of the formation of the Company's equity incentive effect, that equity incentives to influence what factors and conduction mechanism of the performance of the company. Effectiveness of equity incentives play requires the following corresponding conditions: (1) efficient capital markets. The incentive can be summed up as the effort to determine performance, decided to stock performance, stock price decided to reward. Therefore, the effectiveness of the capital market, stock prices really reflect the value of the company, and to some extent determines the positive effect of equity incentives play. (2) effective manager market selection mechanism. Effective manager market selection mechanism can guarantee the quality of managers, long-term constraints to guide mechanism on the behavior of the managers. Only in the survival of the fittest competitive market conditions, managers can in the course of business, to consider the value of positioning itself in the talent market and refrain from speculative behavior. (3) Effective product market competition mechanism. The degree of competition in the market reflect corporate performance made the effort and managers. Reflect product price information and thus reflect production information, as well as the costs caused by the hidden income to the enterprise operators, as well as reflecting the operation and management activities of the managers, to achieve the purpose of the constraint manager. (4) improve corporate governance mechanisms. Clear system of property rights and improve the corporate governance structure is the basis of the system of equity incentive effect play. (5) the relevant policies of the protection mechanism. Complete policies and regulations to guide the implementation of equity incentive system positively, sanctions behavior contrary to market principles.
Equity incentives for China's listed companies, corporate governance structure to further improve, especially the capital market, managers market, product market and related policies and regulations should be further complemented and improved, and the only way, play its equity incentive
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