Executive Stock Option

With the separation of ownership and management, there comes out information asymmetry and subsequently the problem of agency costs. How to minimize agency costs is a dilemma each modern enterprise faced with. Some theorists claim that the best way is to make the managers themselves become one of the owners so that their benefits will connect with the owners'. Based on their theories, executive stock option (ESO in short) comes into practice as an incentive instrument and spreads at a great speed. While ESO is prevailing oversea, it's still a newly explored realm in China and needs more research and practice. This is an opportunity as well as a challenge. We should greet the challenge and grasp the opportunity. Therefore we are required to make good design of ESO and meanwhile to point out the obstacles outside of the enterprises. Both the enterprises and the public should pay great effort to the development of ESO. This paper intends to make a little contribution to ESO's development in our country.The paper is made up of an introduction and four chapters. In the introduction, some significant data are listed to illustrate the popularity of ESO in developed countries. The first chapter is an outline of ESO. It explains three aspects, namely what's ESO, what roles does it play in practice and what are the differences between ESO and stock option, the differences between ESO and future stock, the differences between ESO and executive -owned stock plan.The second chapter expounds the factors that caused and accelerated the origination and development of ESO, which include themotives from the inner of the equity and the impetus from the outer of the equity. The third chapter emphasizes on the design of the ESO plan. In the first part of this chapter, the composer analyzes the difficulties in designing ESO and introduces the domestic and abroad practices as reference. Then, the composer elaborates her concepts of the ESO design.In the forth chapter, the composer enumerates actions about ESO taken in our country, which shows us a bright prospect of ESO in our country. Meanwhile, the composer points out the obstacles to the development of ESO in our country. To remove these obstacles, great efforts are needed. In one word, there is a long way to go before ESO becomes perfect in China. Because of the composer's limited knowledge, it's inevitable that there exist slips and imperfections in the paper. It will be appreciated if you kindly point them out for me. Thank you sincerely.