Study On The Accounting Information Distortion Under ESO

The separation of ownership and control right is the major characteristic of the modern enterprise. Parters(principals)own ownership of corporation and operators(agents)own control rights. The disagreement on the aim between partners and operators results in the problem of principal-agent. For principals, how to design a set of incentive-constraint system which makes agents achieve the max profit of the enterprise and get the max individual benefit is a practical problem the realms of economics and management devote to settling since the establishment of the modern enterprise system, it is also a problem that has not been solved satisfactorily yet.At first, the analysis of relationship between distortion of accounting information and incentive mechanism makes us to know that the distortion of accounting information triggered the contradiction of usefulness and availability of accounting information, so as to promote the development of incentive mechanisms. The effectiveness of incentive mechanism decided on whether to resolve this contradiction or distortion of accounting information. Executive Stock Option(short as ESO)plan, originated from the USA, now has extended to many countries in the world owing to its remarkable role in motivating and restraining the corporate managers. The ESO is the most popular form of long-term compensation incentives for executives in foreign companies. In chapter three, analyzes the definition, characteristics, theory basis and incentive principle of ESO, studies it's defects and effect, and points out the reasons of ESO's failure. In chapter four, this dissertation make a few suggestions according to these reasons, which can prevent and control the distortion of accounting information triggered by ESO effectively.