| All the while, enterprises of our country lack an effective long-term incentive system,which lead to the ineffectiveness of the enterprises. The system of stock option canharmonize the contradiction between managers and shareholders through sharing theresidual claim, which effectively solves the commission-and-agent problem. However,for the lack of corresponding legal system and market environment, dissimilation occurssince this system has been introduced into our country, and the excitation effect is not sosatisfying. In 2006, we have accomplished the reform on the share structure division, andthe Company Law and the Securities Law have also been modified correspondingly. Thebrand-new legal system is bringing new expectation to the practice of stock option in ourcountry and endues this treatise with new significances.This article consists of five chapters.Chapter one: Summarization of stock optionThis chapter introduces the conception of stock option, contrasts and differentiates itwith other related conceptions, and then discusses its legal nature in detail.Chapter two: The positive and negative effects of the stock optionStock option is a "double-edged sword". We must realize its defects before takingadvantage of its strong points. This Chapter analyzes its positive and negative effectsrespectively, and considers it as an effective long-term incentive system. Meanwhile,when introducing stock option into our country, we must cautiously devise thecorresponding supervisory measures in order to prevent its reversed effect.Chapter three: Retrospect the practice of stock option system in our country and look forward to its foreground.Since 90s of last century, a lot of enterprises in our country have carried out thestock option system successively, but most of them failed for the lack of supporting legalsystem and market environment. The completion of the reform on the share structuredivision, which restores the pricing function of the capital market and improves thecorporate govemance structure further, has created conditions for the development of thestock option system in China. This Chapter looks back the practice of stock optionsystem in our country, and expounds the great significance of the reform on the sharestructure division to the improvement of stock option system.Chapter four: Modification and improvement of the legal system relate to stockoptionOn the basis of the former chapters, this chapter lays emphasis on discussing themodification and improvement of legal system relate to stock option. The revision of theCompany Law, which has solved the problem of sources of stock for carrying out stockoption and has improved corporate governance structure, has left law space for thedevelopment of stock option. The Securities Law has also been modified to a great extent.This-ensures the sound development of the stock option by establishing informationdisclosure system and civil liability system preliminarily. However, we still can find someinsufficiencies by surveying this two laws and related Tax Law from the point of view ofstock option, therefore this chapter also gives some advices about it.Chapter five: Measures for preventing the scheme of stock option from disputes andlawsuitsWhen foreign enterprises carried out the stock option in the past decades, a lot ofdisputes occurred due to the careless design of the scheme. As the saying goes thatpreparedness ensures success and unpreparedness spells failure, the last part of this articlefocuses on the typical types of lawsuit in foreign countries, and gives some super(?)icialsuggestions on preventing risks.Everything develops in practice, therefore any theory and system shall be verified inthe practice. Both the independent director system and the stock option system are justways of exploring and reforming. With a fine hope of " A diversity lead to prosperity",this article explores how to improve the legal system relate to the stock option system. Ihope it will be helpful for solving the problem of the lack of long-term incentive system.
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