Research On The Equity Incentive System Of Chinese Listed Company

The theory about the separation of ownership and management is the most important one in the modern corporate research. It creates two different interest groups who are shareholders as the owner of the company and the executives including CEO and managers who are the management of the company. The shareholders hope to maximize the company's interests while the managers who will pay more attention to the personal profits. The'agency cost'is the problem between these two interest groups.In order to decrease the agency cost and let the company runs more efficiency, the corporate begins to use the scientific techniques to lower the agency cost and enhance the efficiency of the company. Equity incentive plan is such a system that is invented to decrease the agency cost. Because the executives include CEO and managers are awarded the equity of the company to align the ownerships and the managements together. The executives who have company's equities can be considered to have double statuses, one is the manager and the other is the owner. So they will have an incentive to give a better performance. Compensation plan is another incentive method for the company to incentive the executives to work well and make the profits for the shareholders. Usually, we have the compensation package which includes wages, bonus, welfare and long-term incentive, namely equity incentive plan. The financial crisis created in 2007 highlighted the"over executive compensation". Those who did poor performance but got high compensation angered the populations. The whole counries began to limit the"executives'compensation revolution". From the composition of executives'compensation package, we can come to the conclusion that the key point to the"high compensation"is equity incentive plan. The equity incentive plan loses its effectiveness.In the perspective of practical, equity incentive plan has some weaknesses such as people can hardly distinguish the profits from the executives` performance or market movements, the executives have the special status to use the insider information or change the time and its power to influence the directors etc. Nowadays, whatever in practical or academic, scholars is trying to solve these problems and make the full use of the incentive plan from the perspective of executive compensation revolution.Besides the preamble, the paper includes four chapters: The Chapter one offers a description of the salary system of executive and states the facts that incentive equity occupies the big portion in the salary system of executives, and also presents a comprehensive idea of component element of this system, current situation and the"pay without performance"phenomenon.The next chapter mainly analyzes the reform of the salary system of the senior executive in many countries in recent days. The author insists that we should classify the practical situation and solve the false function of the incentive mechanism in certain time.The third chapter shows the practical development of incentive equity and relative regulation supporting. And this section focus on the several factors influence the incentive stock, such as the dependent compensation committee, the incentive plan include non stock profit resulting the effect between compensation and performance, and the shortage of supervision.The fourth chapter elaborates from the perspective of "compensation revolution", I will give some recommendations to perfect the equity incentive plan. In order to link the performance of executives and the result of company through implementing the equity incentive plan.