| Executive Stock Option is a measure of long-term stimulation, whose effectiveness has been proved by the practice of many developed countries. The reason why ESO emerged is that the traditional salary structure cannot supply the long-term stimulation that is necessary to solve the Principal-Agent problem.For a long time, many state-owned enterprises have taken foreign ESO mode to spread it, which makes it clear that the strong request of enterprises to reform the property rights system and to solve benefit conflict in principal-agent problem. But we should remember, only in a certain policy environment can the institution come into effect. The developments of ESO in developed countries such as America are highly related to the mature market there. When analyzing the ESO project of many enterprises in china, you will discover that most of them are just analogues to ESO. The scheme is that most of the bonus is turned to stock and the beneficiary cannot choose whether to buy or not. The criterion for distribution is the achievements of managers made in the past time, not success in the future. Obviously, such project will induce a different stimulation result, and cannot solve the perennial malpractice in many state-owned enterprises. Needless to say, there is great advantage to replace the existent project with the standard ESO, but as a new creative mechanism from foreign countries, there is no necessary policy and related law to assort to the spreading of ESO in china. The obstructions lie in the following aspects: the stock market is not normative; there is no perfect enterpriser market in china where enterprises can select managers freely; the index of achievements is not very effective; many problems exist in enterprises, such as the issue of property rights, limitation in corporate governance, the lack of a nationwide and normative law on executive stock option to govern the implement of ESO. Without solving these problems, the advantage of ESO cannot bring into full play. |
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