Comment On US's ESOPs

The ESOPs means a new property ownership organization form in which enterprise staff acquire their own enterprise's shares through certain trust institution, which sits in the board of directors and participates in the operation management as a representative for the staff, and have the company's profit distribution in proportion to their shares. The American ESOPs went through a lengthy process from its emergence to the present scale. Phase 1 was between the late 18th century and the 1950s, when America witnessed the establishments of cooperatives,"Labor Knights", industrial and commercial federation, and stock purchase programs. Phase 2 was from the late 1950s to the early 1970s, when America worked out stock incentive programs. Phase 3 was after 1974, when staff shareholding programs were promulgated and developing.Among developed countries, the U.S.A. was the first to promulgate laws on staff shareholding. The American federal and state legislatures'relevant legislations created good outside environment for the practice of ESOPs. The Congress also revised many laws to standardize and encourage the ESOPs. Now the American Congress has promulgated nearly 30 federal laws to support and promote the ESOPs development, and most of the 50 states have promulgated laws on staff shareholdings. Up to now, the laws on staff shareholding have been amended more than 10 times.The American ESOPs has appeared in various forms up to date. According to the American General Accounting Office's report on ESOPs, there are mainly two types of the ESOPs in the U.S.A: non-leverage staff shareholding program and leverage staff shareholding program. The basic principles of the American ESOPs are: principle of private ownership, antitrust principle, principle of extensive participation, and principle of limited participation. The characteristics of the American ESOPs are: First, in terms of the forms by which staff acquire shares, they are mainly through credit and advance payment for labor; second, in terms of the methods by which staff acquire shares, the shares are acquired gradually within certain time limits. Thirdly, in terms of staff share management, specialized institutions are set up to exercise concentrate and unified management. Fourth, in terms of restrictions to staff shares, there are strict regulations on share transfer to prevent internal shares from getting out, and staff are only given appropriate participation and decision-making powers. Fifthly, in terms of social securities system correlation, the staff with the shares will be rewarded with cashed share dividends when they retire, which constitutes an important part of the staff pensions. Sixth, in terms of the ESOPs promotion incentives, American laws offer taxation favors to the staff shareholding system from many aspects.There is no doubt that the American staff shareholding program has played an active role in many aspects. It dulls the partiality of social distributions, improves the relations between staff and enterprises, helps enterprises scatter operation risks, raises capital utilization rates, promotes corporate development, and brings about reforms in social securities models. All the things have two sides, and so is the American staff shareholding system. While appreciating the outstanding achievements of the American staff shareholding system, we have also noticed that this system is not unassailable, and it has many shortcomings, which have some negative impact on the American economic development. For instance, it creates some obstacles against economic development; it has limited scope of practice; many staff's incomes lack stability; it is not conducive for markets to play the function of economic leverage regulations. The American ESOPs have given us much enlightenment. First, there should be unified management on staff shares. Second, preferential taxation incentives can effectively promote the ESOPs. Finally, stable capital sources should be made available to staff share acquisitions.In our country, the staff shareholding system has rapidly developed since the shareholding system reforms of the state-owned enterprises were launched. Currently, the number of regions that have practiced staff shareholdings, enterprises, people involved, and capital amounts are at quite a large scale. However, due to the overspeeding staff shareholding system, there are inevitably many deficiencies and shortcomings. This thesis mainly introduces and analyzes the two common forms to reform state-owned enterprises into shareholding companies: internal staff shares and staff shareholding boards with shares.The issuance of internal staff shares took place mainly before July 1, 1994, when the"Company Law"was promulgated. It means that, when state-owned enterprises or collective-owned enterprises change into shareholding limited-liability companies, they sell shares to individual staff members of the enterprises, or the shares were sold before the system transformation and turned from the enterprise internal shares into shares of the shareholding companies after the system transformation. Main existing problems of the internal shares are: lack of unified and coordinated management systems, qualification differentials among the enterprises involved in the staff shareholdings, equilibration and compulsion of staff shareholdings, welfare-orientation of staff shareholdings, share transfer at ramdom, difficulty for staff to participate in corporate decision making, and lack of necessary capital sources for staff shareholdings. The staff shareholding boards with shares came into being after the"Company Law"of 1994. It refers to"a staff shareholding board with the nature of mass organization legal person status established with staff capital contributions, which invests capital in the company to become one of the legal-person shareholders of the company. The company staff will'indirectly'hold the company's shares through the shareholding board in proportion to their capital contributions". The major existing problems of the shareholding board are: non-standard management of the staff shareholding board, likely conflicts caused by trade union representative of the shareholding board, interest imbalance bwteen shareholding staff and non-shareholding staff, difficulty in giving play to the shareholding board's supervision role, and lack of legal basis and capital source for share repurchase.The American experience proves that legislations can provide staff shareholding with the most stable and solid systematic guarantee. Given our country's actual situations of economic development, there is need to promulgate laws on staff shareholding systems. So it is the general course of development to have legislations on staff shareholding systems. The author, on the basis of referring to the American experience, makes some proposals on our country's legislations on staff shareholding systems: First, clarifying the preconditions for companies to practice staff shareholding systems; second, encouraging more staff to participate in staff shareholding systems; third, prescribing for the self-willingness principle in staff shareholding; fourth, restricting the share-powers of shareholding staff; fifth, clearly prescribing for capital sources of staff shareholding.