| The separation of ownership right from control right brings forth the agency problem between the tangible assets providers (the principals) and the intangible assets (human resources, managerial and innovative talents) providers (the managers). In general, the owners' objective is maximization of value of equity and assets of the corporation, while the managers aim at more on-job consumption with less working efforts, larger than optimal size investment to increase their power, or even increase their utilities through embezzlement. So the interests of owners and managers (principals and agents, respectively) are not aligned, leading to what called "agency costs". To reduce this problem, in market economy countries like USA, the incentive packages like stock options plan are introduced to motivate and constrain the managers, with favorable results. In China, the research on agency problems begun after the Communist Party issued the Resolution on Issues about the State-run Enterprises Reforms and Developments on the 4th Meeting of 15th Congress of Communist Party. Many scholars, researchers and practitioners had done a lot of researches on stock incentives, and published many working papers and books on this field, but most of the researches are focused on: 1. Introduction to the theory and practice of foreign countries (mostly America); 2. Discussion of relationship between corporate governance structure and stock incentives; 3. Analysis of the legal and institutional obstacles, and operational difficulties facing the implementation of stock option program in China. However, relatively little writing had been published on the subject of how to design an effective management stock incentive program that adapts to the company's external environments. This thesis will thus study the problem of management stock incentives implementation in China through this viewpoint.This paper starts with a brief introduction to management stock incentives theory and its development history. Through the introduction to basic principles, we demonstrate the working mechanism of the stock incentives; through the discussion of the models and basic elements of stock incentives plan, we demonstrate the procedures and practices of stock incentives plan; through the introduction of implementation scope of foreign stock incentives plan and the findings of its results, we understand that stock incentives are good incentive measures with long-term effectiveness. Section Ⅰ will finish with a short description of the development of stock incentives system in China.Section Ⅱ focused on the implementation of stock incentives plan in China and the problems encountered. First,it is an introduction and an appraisal of present models of stock incentives plan in China, with a discussion of the practice and deficiency of various models and end with a summary of working experiences and operational models which are applicable to Chinese environments. Secondly, by in-depth analysis of some failed cases in Chinese public listing companies, we summary some conditions for stock incentives plan to be effective. Thirdly, through discussion of problems encountered during the stock incentives plan implementation process, we will pave the way for the summaries of operational measures to implement stock incentives plan in China in Section Ⅲ.Section Ⅲ focused on discussion of operational measures to implement stock incentives plan in Chinese enterprises. The discussion proceeds with two approaches, one is the enterprise approach; the other is the institutional approach. For enterprise approach, we discuss the internal and external requirements to implement an effective stock incentive plan, the selection of various models and the design of implementation procedures. For the institutional approach, we discuss how the government can help implementing the management stock incentives program by institutional changes, and in considering the foreign experience and the local conditions, we conclude with some operational suggestions.This paper, afte... |
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