Study Of The Stock Option System

Stock option is a long-term incentive mechanism employed by the owner of corporation asset to business managers. With the establishment of the modern enterprise system, the corporate ownership and the rights of management has separated gradually. Such separation leads to the conflict of interests between shareholders and managers, and thus affects the development of modern enterprise. Stock option, as a long-term incentive mechanism to managers, becomes the best method to resolve this contradiction. This paper starts with the basic theory of stock option, and introduces the development of stock option system in foreign countries. Then the paper explores the implementation of stock option system in China and analyses a number of specific issues arising from the practice. In addition, the paper proposes the ideas of adaptation and improvement of the incentive mechanism under the current system in China.This paper includes five parts.Chapter one is the introduction, which shows the background and significance of this study and introduces the leading research results both domestic and abroad.Chapter two firstly concerns the system of stock option in general. In particular, this chapter explains the definition and legal features of stock options, and distinguishes several concepts similar to stock option. Then this chapter analyses the theory which brings stock option, the value of the system and the history of stock option system in foreign countries.Chapter three firstly explores the implementation of stock option in practice in China, including three models:Shanghai model, Wuhan model and Beijing model. Then it describes the current stock option system in the U.S. After that this chapter conducts a comparison between the two systems in a simple manner, and summarizes the characteristics of stock option system in China. It mainly reflects the flexibility of the institutional arrangements,the non-selective of exercise,the imperfection of power, the broad scope of application and the administration of the operation mechanism. Based on this,the author thinks the implementation of stock option in practice in China is not standardized and has distinctive Chinese characteristics.Therefore, we can not say it is not successful stock option practices.Chapter four puts forward three perspectives for improving the system of stock option system in China, embracing the legal system, corporate governance structure and the external market environment, based on the current stock options system in China. Regarding the legal system, this chapter proposes to improve company law, securities law, tax law, accounting system and labour laws and regulations. Concerning corporate governance, the paper recommends optimizing company's ownership structure, improving the system of independent directors, strengthening the role of the board of supervisors and recognizing the position of managers in corporate governance. With regards to the external market environment, the paper suggests to regulate the agency's behaviour, establish the professional managers market, improve the effectiveness of securities market and so forth.Chapter five concludes the whole paper, and further points out both the innovative contribution and the limitation of this paper. Concerning the innovative contribution, this part analyses the legal nature and the institutional values of the stock option comprehensively; Enron and Microsoft events as a watershed, it re-examins the development trend of the stock option system;it proposes a number of feasible suggestions and measures of perfecting the system of stock options from multi-angle and multi-level. Regarding the limitation, the selection of material is not sufficiently rich; the accounting system for the analysis is not deep enough.