On The Management Stock

One of the most outstanding characteristics of modern corporations is the separation of ownership and management. Managers and owners do not have exactly the same interests. For example, the managers may invest or expend money to benefit or strengthen themselves. Management stock plan has been widely used to guarantee the loyalty to the corporation in recent years. The main idea of management stock plan is making the managers some kind of owners, with conditions and limitations. Theoretically, agent cost theories influenced it. Practically in operations, it is after ESOP (employee stock ownership plan) and MBO (management buyout). Technically, it is a portfolio with incentive stock options as the core.An option is the right to buy or sell for a limited time a particular good at a specified price. Since 1973, options have been traded on individual stocks, and the options market has experienced rapid growth, with the creation of new exchanges and new kinds of option contracts. Incentive stock options are very suitable to motivate the managers, in comparatively long periods and on various specified conditions, and with limitations.About 80% of our listed corporations were reformed from the state-owned units. The main stockholder is still the state. The members of the board of directors own very few stocks, not to say managers. To establish dynamic management systems and operating mechanisms, we need a proper plan to motivate the managers to work efficiently and behave properly without personal, watchful owners. In fact, management stock plan has been focused on as the key. Such plans are also helpful to the strategy of "ownership multiplication".This thesis consists of three parts. The first part is "Incentive mechanisms for modem corporations". Here 1 meant to explain the importance of management stock plan theoretically. The second part is "The main types of management stock plans in the corporations". I summarized their practices as four models. The third part is " Status of the management stock ownership", based on a statistics about management stock ownership of the listed corporations at Shenzhen and Shanghai stock markets, on December 31st, 1998.