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Equity Incentive of Listed Companies in China Problems and Countermeasures

Author: LiuHaiYan From: www.yourpaper.net Posted: 2010-03-07 17:44:23 Read:
Abstract: Since 1993 Shenzhen Vanke Co., Ltd. introduced the system of stock options, listed companies in China has been trying to explore the implementation of equity incentive in our environment. However, due to the constraints of the prevailing laws and regulations, China's listed companies equity incentive of the road is very difficult.
Keywords: listed company equity incentive Countermeasures

Equity incentive the existing problems in the implementation of the analysis

(A) incentive program design is not perfect
Launch equity incentive programs listed companies, stock options are prevalent mode favored excessive number of incentive stock of the company directors and executives, incentive costs low phenomenon. Makers did not take into account the market downturn, stock options may fail, and cause the value assigned to the subsidiary's directors and executives excessive number of incentive imbalance and weaken the incentive to lower incentive costs, the number of listed companies, the exercise price The effect of issues such as these will have a direct impact on the implementation of the incentive effect.
(B) the corporate governance structure is not perfect
The effectiveness of the implementation of sound corporate governance structure and equity incentive are mutually reinforcing. Implementation of equity incentive to reduce the risk of moral hazard in the principal-agent relationship. In addition, equity incentive to set more stringent examination procedures to further standardize the operations of the company. Therefore, the equity incentive conducive to strengthening corporate governance. Conversely, improve the corporate governance structure for the implementation of incentive stock options to create a good internal environment, improved by strengthening the control and supervision of the owners, the board structure, strengthen the independence of the Board of Supervisors, will also strengthen the effect of incentive stock options. Internal control in listed companies but there is serious cause improper related party transactions between the short-term behavior, as well as the controlling shareholder of the large number of listed companies.
(C) The manager market is not complete
The 2007 survey showed superior departments still a major role in the generation of the business process. The administrative appointments due to many complex factors often with considerable uncertainty, is usually the case, the operators worked in a company generally does not exceed five years, and the exercise period of the stock options generally takes five years -10 years or even longer. In this case, the equity incentive long-term incentives can easily conflict with unforeseen administrative appointments made.
(D) the use of equity incentives to stimulate excessive
Is not in contradiction with insufficient incentives for top management of gray income, even illegal income, constitute the main source of their income, and thus increase or decrease in the dominant revenue incentive not or does not work. In accordance with the law of diminishing utility of economics, income reaches a certain level, by raising incomes to motivate very difficult. Managers will be more to consider issues such as maintaining the status quo, to avoid their own risk; too much too much inspired by the spirit, honor the aura, or "blinders" carried away, carried away, resulting in the decision-making errors, or a sense of honor and numbness, loss of forward momentum.
(E) evaluation index system is not perfect
A necessary condition for the implementation of equity incentive enterprise has been the establishment of a comprehensive performance evaluation system, and our existing performance evaluation system evaluation object with fuzzy goals, indicators of a single, standard single defect, the financial index system is not comprehensive, detailed, non-financial indicators involves less, not comprehensive, objective and scientifically reflect the results of operations of the enterprise and management effort, to some extent weaken the effectiveness of incentive stock options. Second, measures to improve our equity incentive

(A) to develop practical equity incentive program
Listed companies should not contrary to the relevant provisions of the State on the basis of equity incentive programs to develop practical, to avoid the embarrassment and contrary to the provisions of the Securities will be halted. Stimulate excessive, it may affect the enthusiasm of executives and staff, are inert, without efforts easy to get, but the development of the company's. At the same time will cause the market and shareholders questioned. Excitation threshold is too high, through the efforts and hard work can not achieve the goal, only to be prohibitive, the same can not mobilize the enthusiasm of executives and staff. So what's the exercise price of the share incentive? Comprehensive both listed companies, incentive balance of interests among the objects as well as small and medium-sized shareholders, to achieve a win-win. Regulators should be for the market, as investors good equity incentive Off, the introduction of a more perfect, more comprehensive, more detailed equity incentive management approach "to supervise the management and implementation of this approach, to create a good stock market environment; listed companies to develop a fair and reasonable equity incentive program is feasible The Equity Incentive smooth key.
(B) improve the governance structure, strengthen the supervisory role
Improve the corporate governance structure of the key is to solve the internal control problems. The force absolutely Company operators or day-to-day managers "both the referee and when the athletes," the phenomenon. Equity incentive related to changes in the company's capital structure and the interests of the public shareholders, and the general remuneration package, it needs to be more rigorous consideration and decision-making mechanisms, the independent directors, the Remuneration Committee which should play a more active role. Option Scheme of the listed companies in addition to the approval of the special resolution of the shareholders' meeting, the company's outside lawyers, independent financial adviser and advisory body of the views or recommendations should be fully utilized and valued. Recommended the establishment of corporate insiders, shareholder investor the option theory expert tripartite Option Incentive the scientific governance mechanisms. The internal options beneficiary shareholders options investor decision-makers, the theory experts are options assessment or design. Second, improve the corporate governance of external mechanisms. Government can set up a regulatory agency. External mechanisms of corporate governance, an effective government regulatory agencies is very important, especially in the early stages of development of the emerging market economies.
(C) the establishment of a common goal
Specific behavioral objectives of principal and agent are inconsistent. Causing agent of moral hazard and adverse selection. However, the enterprise value maximization is the ultimate goal of the client, the agent should get paid by the operation of the enterprise, and the two sides do not want to face bleak prospects, which provided an opportunity for both target coordination. Established under the premise of the principal-agent contract, the agent's compensation should be relatively fixed, the principal appropriate transferring part of the incremental value in the agent, so that enterprises can share incremental value. This largely established the common goal of the principal-agent, to produce win-win results. In reality, the principal-agent between the two sides to establish a flexible contract is more feasible.
(D) develop an effective and stable capital market
The first is to solve the problem of the size of the non. Recommended "size of the non-the" lifted deadline design should be extended, set 10 years or longer to the lifting of the ban is completed, only lifted part of a year can be considered. In this way, not interested in the stock market caused by too much pressure; the size of non-lifting of the ban after the transaction, the size of the central enterprises to non-lifting of the ban should be a clear timetable, the market will take some time to absorb the pressure of shares to change the size of non-lifting of the ban. Secondly, the introduction of short-selling mechanism. In the case of "short selling" mechanism, if the shareholders of the company's reorganization also expectations that they can continue to hold the company's stock, but through the operating practices of the "short selling", on the one hand, reduce losses, and the other also passed to the directors and managers of a signal of dissatisfaction.
(E) improving the evaluation index, the formation of scientific performance evaluation system
Equity incentive is built on top of the business evaluation operators, effective performance evaluation system is a guarantee of equity incentive effect is embodied. Implementation of equity incentive, in fact, a test of system performance evaluation of China's listed companies and remuneration system. To establish a scientific and reasonable evaluation index to reflect the the operators effort and operating results, the comprehensive evaluation of the company's future development potential, is essential for the implementation of equity incentive.
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