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Equity Incentive Equity Incentive (Stockholder&#39;s rights drive) along with the increasingly dispersed shareholding and management of increasingly complex technology, the world&#39;s largest companies for a reasonable incentive for companies to management, innovation incentives, have introduced the form of stock options and other equity incentives. Incentive is an operator obtained by the form of company stock to give enterprise managers a certain economic rights, to enable them to participate as shareholders ﹑ share profits, business decisions to take risks, so diligently for the company&#39;s long-term development services kind of incentive method. Managers and shareholders is actually an agent relationship, shareholders delegate the management of assets managers. But in fact, in the agency relationship, because of information asymmetry between shareholders and managers do not fully contract, rely on the manager&#39;s &quot;moral self-discipline.&quot; Shareholders and managers is inconsistent with the goal, the shareholders wish to maximize the value of their equity holdings, the manager wants to maximize its effectiveness, so that exists between shareholders and managers, &quot;moral hazard&quot; incentive and restraint mechanisms through to guide and limit behavior of managers. Incentives in different ways, mainly according to the manager the wage conditions and qualifications companies are of pre-defined, relatively stable in a given period, so the relationship with the company&#39;s performance is not very close. Bonus financial indicators generally the assessment to determine the manager&#39;s income, and is therefore closely related to the company&#39;s short-term performance, but no significant relationship between the company&#39;s long-term value, managers may be short-term financial targets for the company&#39;s long-term interest expense. But from the shareholder point of view, his concern is the increase in the company long-term value. Especially for growth-oriented companies, the value of managers is to achieve more long-term value of the increase in the company, not just short-term financial targets to achieve. For managers concerned about the interests of shareholders, need to pursue the interests of managers and shareholders, as much as possible in line. In this respect, equity and incentive is a better solution. By making managers holding shares in a given period, Xiangshou equity value-added revenue, and in some extent Chengdanfengxian, allows managers in Jingyingguocheng Zhong De Guanxingongsi more long-term value. Equity incentive managers to prevent short-term behavior, and guide their long-term incentives for good behavior and a constraint. (1) Performance shares Is determined at the beginning of a more reasonable performance goals, if the incentive object to the end of the year to achieve the desired objectives, the Company Shouyu the number of shares or the extraction of certain incentive fund to buy shares. Cash flow performance of stocks usually have the time and quantity limits. Another stock with the performance models are very similar in operation and the role of long-term incentives is performance units, the difference between it and the performance of the stock is the stock performance of the stock is granted, the performance units are awarded cash. (2) stock options Refers to the object granted to a right incentive, incentive objects can be within a specified period of time to buy a pre-determined price of a number of outstanding shares of the company, you can give up this right. The exercise of stock options also have the time and quantitative restrictions, and the need to target their own incentive spending cash for the exercise. Some listed companies in China currently applied a virtual stock option is a virtual combination of stock and stock options that were granted to encourage the object is a virtual stock options, incentive objects acquired after exercise is a virtual stock. (3) Virtual Stock Refers to the object granted to a virtual stock incentive, incentive object can thus enjoy a certain amount of stock appreciation rights and dividend income, but no title, no right to vote, can not be transferred and sold, leaving the company to automatically invalid. (4) Stock appreciation rights Refers to the object granted to a right incentive, if the stock price up, encouraging the object can be obtained through the exercise of stock price appreciation of the corresponding number of income incentives do not object to pay cash for the right line, line of the right to receive cash or equivalent shares . (5) restricted stock Is the number of objects prior to grant incentive stock, but the source of the stock, selling, etc. There are special restrictions, generally only when the incentive target to complete specific goals (such as Niukuiweiying), the incentive to sell restricted stock, and the object can be benefit. (6) deferred payment Means that the company remuneration package to stimulate the object-Income Plan, including You Incentive income partly within the equity, equity incentive income Buzai then released, but according to the company converted into a stock market value stock Gong Ping Shu Liang, Zai certain Qi Xianhou With a company stock Xing Shi Huo Genju when the stock market value of cash incentive paid to the object. (7) the operator / employee stock ownership The object is to hold a certain number of incentive stock of this company, the company&#39;s free gift of these stock incentive object, or subsidies to encourage companies to buy the object, or the incentive to buy the object at its own expense. Incentive object can benefit from stock appreciation in the stock devaluation loss. (8) management / employee buy Refers to the management or staff leverage financing to purchase shares of the Company, to become shareholders, and other shareholder risk and profit sharing, thereby changing the company&#39;s ownership structure, control structure and asset structure to achieve business ownership. (9) book value appreciation rights Purchase of specific types and virtual types are divided into two types. Object type is the incentive to buy in the beginning of the actual net asset value per share to purchase a certain number of shares, net asset per share at the end of the period and then sold back to the end of the value of the company. Type is the motivation of virtual objects without spending money in the beginning, the company granted incentive shares the name of the object number, in the end of the net assets per share, according to the company on behalf of the increment and the number of shares to calculate the incentive earnings target, and accordingly to target cash incentive. Above first to eighth species associated with the securities market equity incentive model, in the incentive model, the incentive object proceeds by the company&#39;s stock prices. The book value and stock appreciation rights are not related to equity incentive model, incentive object proceeds only with the company&#39;s financial indicators of a net asset value per share --- about, nothing to do with price. Effectiveness of equity incentives to a large extent depends on the establishment of a sound market manager, and only in appropriate conditions, the equity incentive to play its lead manager role in long-term behavior of the positive. Whether the behavior of the manager&#39;s long-term interests of shareholders, in addition to its intrinsic interest driven outside by a variety of external mechanisms also influence the behavior of managers is its intrinsic interest of the final drive and the external impact of the balance of the results. Incentive is only part of various external factors, its application requires the environment to support a variety of mechanisms, these mechanisms can be summarized as market selection, market evaluation mechanisms to control constraint mechanism, incentive mechanism and the comprehensive policy and legal environment provided by the Government . 1. Market selection mechanism Full market selection mechanism can guarantee the quality of managers, and managers have long-term behavior of the constraints guide. Administrative appointment or other non-market selection method to determine the managers, it is difficult and long-term interests of shareholders in line, it is difficult to play a role in incentive and restraint mechanisms. For such managers to provide equity incentives is no basis, nor the interests of shareholders. Professional managers provide a good market, the market selection mechanism, a good state of market competition will eliminate unqualified managers, managers in this mechanism is market-determined value, the manager will consider in the course of business in the manager&#39;s own The value of the market positioning and avoid speculation, such acts as lazy. In this environment, equity incentive may be the only economic and effective. 2. Market evaluation mechanisms No objective evaluation of effective marketing, it is difficult on the company&#39;s value and performance of managers to make a reasonable assessment. Excessive manipulation in the market, excessive government intervention and social audit system can not guarantee an objective and fair circumstances, the capital market is inefficient its difficult to determine the stock&#39;s long-term value, it is unlikely the way through a share incentive evaluate and motivate managers. No reasonable fair market evaluation mechanism, the manager of market choice and the incentive will be impossible. Incentive means, of course, as an incentive will be impossible to play. 3. Control constraint mechanism Control constraint mechanism is to manager of the restrictions, including laws and regulations, policies, company policy, corporate control management system. Good control constraint mechanism, to prevent the failure of the manager&#39;s behavior, to ensure the healthy development of the company. Binding mechanism is the role of incentives can not be replaced. Some domestic problems of state-owned enterprise managers, not just motivate the problem, the problem is largely bound to strengthen the corporate governance structure of the building will help to improve the efficiency of binding mechanism. 4. Comprehensive incentive mechanism Comprehensive incentive mechanism is the means through integrated behavior of the manager&#39;s guide, specifically including wages, bonuses, equity incentive, promotion, training, benefits, good working environment. Different incentives and effectiveness of its incentive-oriented is different, different companies, different managers, different environments and different business methods corresponding to the best incentive is different. Companies need to design incentives under different combination of circumstances. One form of incentive stock options, all depending on the size of incentive costs and benefits in consideration. 5. The policy environment Government has an obligation by law and regulations, management system in the form of the mechanism of the formation and strengthening of policy support, create a favorable policy environment, inappropriate policies will play a role in impeding mechanisms. Domestic equity incentive, in the operational source key face stock, stock sales channels and application of specific legal issues, market environment, the Government also needs to strengthen the capital market to eliminate the unreasonable monopoly protection, separation of enterprise Reform of the operator by means of appointment to create a favorable policy environment. Yintl (Ying Teng Consulting) for the enterprises through the design of equity incentive plan, equity incentive from which summarizes the main design of several key points: 1, excitation mode choice. Excitation mode is the core issue of equity-based incentives, will determine the effectiveness of incentives. 2, identifying target incentive. Equity Incentives to motivate employees, balance company&#39;s long-term goals and short-term objectives, in particular is concerned about the long-term development and strategic business goals, therefore, Queding incentive Duixiang must take the enterprise-oriented strategic goals, and choose the most valuable to the business strategy personnel. 3, share the source of funds. Since the object was to encourage individuals, thus the source of funds the entire planning process is a key point. 4, assessment index design. Exercise certain incentive stock options tied to performance, one of which is the company&#39;s overall performance conditions, other indicators of personal performance evaluation. 5, determine the incentive amount. 1 small plate excitation Equity As of April 30, 2008, the Shenzhen SME Board 221 listed companies are scheduled to disclose its 2007 Annual Report, 2007, board members of listed companies and equity incentive compensation cases full disclosure. Overall, small board of listed companies can truly reflect the situation of the company&#39;s pay and high pay and company directors and supervisors showed a positive correlation between performance. Small plate 25 listed companies launched equity incentive plan, of which 7 have entered the implementation phase, the remaining 18 are in the plan and report to the Commission&#39;s record board approval stage. Zai these 25 companies, the majority of companies using stock options way, the exercise condition was treated with a net asset rate of return, net profit growth rate of Deng Zhibiao to Xian Ding, Bao Zheng Liao Wen Ding&#39;s long-term growth of the company. 2, the excitation Listed Companies Entered after 2008, received domestic and international economic and financial situation affecting, A shares have a dramatic correction. Rational stock return of the equity incentive plan with an excellent implementation of the new space, the listed equity incentive program launched the initiative greatly increased. Just in the first quarter on a total of 21 companies announced a stock incentive program, in which 13 models with stock options, restricted stock 5 used, two with stock appreciation rights, restricted stock with a stock appreciation rights mixed mode. 2007, the company&#39;s equity incentive program listed in number far more than in 2006, the year a total of 13 listed companies launch equity incentive plan. 2007 Equity Incentive listed companies showed the following significant features: First of all, though there is far more than in 2006, but the quality of equity incentive programs there are a significant improvement. State-owned holding companies in particular equity incentive gradually scientific norms, the performance of equity incentive in improving the performance evaluation system, of scientific performance evaluation indicators. Second, the program announced in 2007, all options are stock options. Standing of the shareholders and the company&#39;s point of view, compared to restricted stock incentive program, stock options model has two significant advantages: a model of stock options more difficult to obtain benefits, incentive earnings target of all the shares of listed companies from The grant price of the premium. Second, stock option plans of listed companies, basically no effect on cash flow.
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