On Incentive Mechanism Of State - Owned Enterprise Managers

This paper touches upon motivation mechanism of state-owned enterprises in general, and focuses on such specific incentive measures as the annual pay system and executive stock options (ESO) targeted at top-level executives of state-owned enterprises in particular. It consists of 3 major parts. The 1st part examines the theoretical models of needs and motivations with regard to managerial personnel in corporate setting, including general basic needs models advocated by Maslow and Alderfer, and special needs models initiated by McGregor, McClelland, Weiner, Herzberg, Vroom, Locke, and Adams, to name just a few. Then the author further analyzes researches conducted by the Dalian Training Center, professor Zhang Weiying, and researcher Zhou Qiren. In the 2nd part, the author manages to establish a needs framework concerning executives of state-owned entrepreses in China. According to the surveys of Chinese Entrepreneurs Investigation System, and to the author's own research, the paper summarizes all the important needs of executives of the state-owned enterprises, including professional success, self-decision, self-development, personal relationships, higher economic status, security, and fair competition, etc.Based on the study of needs structure of the state-owned enterprises, the motivation mechanism is further explored in the 3rd part. In view of their internal as well as external needs, the author insists on combining the internal and external motivations in order to achieve an expected effect. Internal motivations, like setting a reasonable objective, reinforcing the challenges of work, strengthening the training, are able to satisfy their internal needs, including professional success, self-decision, and self-development. In the same time, the external motivations aim at meeting their external needs, higher economic status, security, and fair competition included. The author emphasizes that a fair competitive environment and particularly an incentive compensation package is crucial to exerting the role of external motivations. The author's study shows the motivation mechanism of annual pay and the executive stock options (ESO) as incentive compensation is the most essential to motivating the state entrepreneur in present China.In conclusion, in order to deepen the economic reform and to improve the performance of state-owned enterprises so as to enable the sustainable growth of our national economy, the enthusiasm and initiatives of executives of state-owned enterprises in our country must be aroused and most importantly heated. The paper has demonstrated strongly that an effective motivation mechanism for executives of state-owned enterprises based on full understanding of their basic and specific needs is the key to the accomplishment of the mission and objectives of the current reform of state-owned enterprises in China as well as to the improvement of their economic performances.