Stock Option Incentive System In China's State-owned Listed Companies

The design of incentive mechanism is the core problem in modern business theory. In recent years, more and more companies have adopted the stock option incentive system to attract the employee. In the west nations, especially in the United States, the stock option system and the chief executive officer system have become the essence of modern company's development. The stock option gives the executive the claim to firm's residue, making the executive become the ownership of the company. The stock option put the personal benefits of the executive and the long-term development of the company together so that urges the executive try his best to develop the company. We can say, the stock option weakens the proxy agency relationship in modern firm system and prompt the development of the company largely. In China, the state-owned listed companies lack long-term incentive system. In order to encourage and control the executive it is necessary to put the stock option system in effect. Currently, some of the listed state-owned companies are putting the stock option system into practice. Owning to the lack of condition and the wrong understanding to the stock option, the practical work needs more improvement. After the Enron corporation's scandal, stock option has been seen as the inducement for the companies to make a false report of the achievement to run up the stock price. In China, many experts also start to suspect whether we should apply the stock option system or not. However the author thinks, the occurrence of the company scandals only exposed the deficiency of the State's firm system. We should take it as a good lesson and take great pains in each aspect to put the stock option into effect continuously. Exactly for this intention the author composed this article. This article is divided into four chapters.Chapter One In this chapter, the author introduces not only the conception of the stock option system and the theory about the stock option but also the condition that implying stock option wants. The content in this chapter will help the readers form a compressive understanding about the stock option system.Chapter Two In this chapter, the author explains why the state-owned listed companies need the stock option, and describes the mode and the characteristics of putting the stock option in practice.Chapter Three In this chapter, the author analyses the problems that appearing in putting the stock option in practice at large. These problems mainly include four aspects, wrong understanding to the stock option, lack of laws, imperfect market and deficiency in corporate governance. Chapter Four In this chapter, the author puts forward several suggests aiming at the problems appearing in implying the stock option. And the author advocates that we should also try other kinds of long-term incentive method as the supplement to stock option.