Executive Stock Option Incentive Mechanism

Executive Stock Option(ESO) is a very effective distribution pattern in the West countries. It aligns the interests of the managers with shareholders. During the enterprise reform in our country, how to encourage the managers to work hard have been a very difficult problem. The government have adopted many kinds of incentive mechanism to encourage the managers. But the result is not very good. The report of Fifteenth National People's Congress (NPC) clearly advanced the combination of dIstribution according to work with distribution according to essential factors of production, so as to realize the change of distribution pattern. After this several cities have tried out ESO. This paper deals with the problem of how to utilize ESO properly on the basis of the characteristic condition of China. The first part of the paper introduces the concept and the main characteristics of ESO. The second part analyses the necessity and feasibility of implementing ESO in China. In the third part I introduce three main ESO models in China at present. Using the experience of America for reference, an innovatory model is displayed at the last part of the paper.