A Study On Executive Stock Options In China

Executive Stock Options (ESO) is a kind of distribution system that Enterprise have been using to solving principal-agent contradiction with the separation of ownership and control. Throughout many year's fulfillment in the western countries, Stock Option System has been proved that it plays an important role in solving incentive problems and enhancing enterprise's competitive position. However, a series of false account scandals of listed company in western countries recently shows that we must pay special attention to the internal defect of the Stock Option System. Since 2005, Share Structure Law of PRC were amended. On Jan 2006, the China Securities Regulatory Commission promulgated and enacted the "Provisional measures on the equity incentives in the listed company". All that mentioned above have provided excellent opportunity for the promotion of the Stock Option System in the listed companies. But because of the special stage of market economy in our country, compare with western countries, this kind of incentive system face different environment and condition. Such advanced and effective mechanism theoretically introduced to domestic produces the effect which would be waited for discussed. Therefore, we should conduct the research rationally and design the system reasonable on ESO.On the base of research the basic theory overseas, take ESO of listed company in our country as the sample, confirm that these company exist the motive and behavior of choice vesting date of ESO. The important reason is that the rule by designed exist defect and the regulation fail to achieve objective and fair. In fact, ESO needs strict environment assumption, the fact of information asymmetrically also cause the risk in the ESO implementation process. On the profits from the U.S. and related actual situation in China, we propose some items when implement ESO should be paid attention, in order to arouse the deeper discussion and interest to display the effect of ESO fully.