The Application Research On The Managers' Motivation Based On EVA

The separation of the ownership and operating right in a company put forward the principal-agents problem. The goal of the agents would be the maximization of their own incomes, while what the companies' owner pursued is maximize the shareholders' income. Therefore, the goals of the managers and shareholders are different. There lies the informational asymmetry between principals and agents, which put forward two kinds of adverse results: one is moral hazards, two is an antidromic selection. The principals have to make sure that the behaviors of the agents could measure up their desires during the process of operating business and making decisions. The article manages to resolve the principal-agent problems by designing a set of managers' motivation scheme. The motivation and restriction mechanism focus on two points: performance measurement and compensation management."No measurement, no management", "you get what you measurement", you have to make sure what you want to measure before you pick up the performance valuation measurement. The research base on the two hypothesis as follow: one is the fundamental goal of a company is to maximize the wealth of the shareholders, the other is that the maximization of the shareholders wealth just means the maximization of the company's valuation.The performance measurement based on accounting profit, such as net profit after taxation, EPS, ROA, and so on., have two serious limitation: on one hand, the traditional measurement indexes didn't make the cost of the equity capital into consideration. On the other hand, managers could manipulate the profit by revise the measurement ways, so the traditional revenue could not accurately calculate the real value created by the company. The managers motivation scheme based on the traditional measurement system would lead to the results that destroy the value creation of the company in the long term. Under the environment of the new science and technology, the stock price could reflect the real value creation of the listed company better, however it also has shortcoming that could be affected by uncontrolled factors.Because the traditional financial measurements were criticized, many new performance valuation measurements were come out. Economic value added (EVA) is one of the most influent measurements. The theory base of EVA is the residual income. When EVA is greater than zero, the company create more wealth than the shareholder desired. EVA equals to the net operating profits after taxation minus the cost of the...