Research On Incentive Mechanism Of Executive Stock Option

Executive stock option is derived from the stock option. After introducing the stock option into human resource management of enterprise, the stock option becomes an incentive mechanism. The conception of Executive Stock Option is that the manager has the right of buying stocks by the beforehand price of having been decided. After 1990s, as a new executive incentive mechanism, Executive Stock Option has been widely used and successfully practiced by most listed companies in U.S.A. It's main merit is that it can tightly connect the manager's personal profit to company's, and aligns the interests of the executives with shareholders. So it shows great effect to the executive.During the enterprise reform in our country, how to encourage the managers to work hard is a very difficult problem. From early days of innovation to now, the government have adopted many kinds of incentive mechanism to encourage the executives, such as the mechanism of connecting salary with achievement, awarding a contract with the manager, the mechanism of annual salary. But the result is not very well. The basic reason is those incentive mechanisms is short-term incentive mechanisms. Long-term incentive mechanism is scarce. So, it is an urgent work of state companies' innovation to build an effective long-term incentive mechanism and encourage the managers to care for the enterprise's future development. Because of the great incentive effect of executive stock option, many civil enterprises have imported executive stock option, but what is the incentive theory of executive stock option? Why does it have so great incentive effect? What effect will it bring to our enterprises if we applied the executive stock option? Can our country's enterprises import the executive stock option and how to import? Based on all the conditions and these questions, this paper makes a deep research of the executive stock option in aspect of the basic theory, advantages, incentive effects, it's condition and it's applicability in our country.This paper is composed of six parts:The part of introduction makes a simple explanation of the background of research, discrimination of main conception, methods of research, this paper's structure, innovation and deficiency. The first chapter introduces executive stock option is derived from American and the current condition of development in American and Japanese, then introduces the revelation to ourcarrying the executive stock option into execution. The second chapter mainly introduces four basic theories: agent theory, human capital theory, incentive theory and X-efficiency theory. And analyses how the executive stock option embodies the three basic theories. The third chapter analyses the executive stock option's advantages in theory firstly, then use a model to show that how the executive makes decisions in condition of two different incentive mechanisms. Lastly, by using AHP method, it shows that the executive stock option has more effect to manager's income than annual salary. The fourth chapter mainly analyses the advantages and disadvantages of the executive stock option by correlative theory and practice in foreign about the executive stock option. In chapter five, this paper firstly introduces the sense of adapting the executive stock option in our country and current condition in our nation's enterprises. Then, according as five typical cases, it shows some blocks and deficiency about introducing the executive stock option to civil enterprises. Finally, it shows that how to design a few important aspects and gives some countermeasures and suggestions about bringing the executive stock option into effect.