Harbour Group's Equity Structure, Incentives, Change And Adjustment

Sichuan Jianyang Gangtong Group Co. Ltd was founded by some managers and technicians from a SOE in the background of SOE reforms, mainly being engaged in manufacturing and R&D of medical mechanic and equipments. After its foundation, it developed quickly but its sales fell into stagnating states very soon.This kind of state to a lager extend was stemmed from its improper equity structure and absence of right incentive institution. In the beginning of foundation, almost every staff has shares and ownership structure was disperse. In the beginning, company's profits is small and there was little conflicts among shareholders, the disperse ownership structure didn't pose problems. However, this kind of disperse ownership structure was prone to lead to incline of shareholders'free riding. In particular, after stages of development when benefits conflicts emerged, some able employee who contributed a lot but owned small shares of the company lost their mood balance and work motivation, which eventually resulted in poor operating efficiency and lower performance. So, in order to keep sound growth, it's necessary to change and adjust the present ownership structure and incentive systems.Equity incentive is a kind of incentive institution by which the manager can get some share of equity after achieving goals of operating performance. Equity incentive let the manager have residual rights and benefits and mitigate their moral hazard. In addition, equity incentive justify their human capital and make the control rights grasped by those employee with higher production capacity.Ownership structure has incentive effect and has close relationship with company's value and development. By equity incentive the company can change and optimize its ownership structure.Firstly, this essay reviews the literature of equity incentive and ownership structure. Secondly, deeply analyze the current status of incentive and extant problems by logic and questionnaires. In the end, based on theory of equity incentive and ownership structure and the current status of company, put forth a rough scheme of equity incentive...