| How to motivate the executives has long been the key point and tricky problem involved in enterprise reform .At the very beginning, reform was operator contracting-oriented, thus leading to the near sighted action .In the recent years, with the deepening of reform ,the motivation towards executive has gradually turned from focusing on short-term motivation to long-term motivation .In practice, annual salary system ,management stock plan and risk-related reward fund have been staged with the intent to find out where the crux of the problem lies ,but the effect is not good.ESO was born in America and has been working successfully for the past 20 years. As an innovation of company incentive system, ESO has created many miracles. Nowadays, ESO is being introduced to China, we are expecting and imaging it. From the practice of ESO in America, we can believe that ESO will be the one of the best long-term motivating system towards executive .So it's vital that we research ESO deeply.ESO gives the executive the right to buy a certain number of shares in the corporation at a fixed price for a certain number of years. The price at which the option is provided is call the "grant" price and is usually the market price at the time when the option are granted. Executive who have been granted stock options hope that the share price will group that they will be able to exercises the stock at the lower price and then sell at the current price.The thesis begins with the principal theory of ESO, followed by the necessity of ESO, and then explains the definition and characteristics of ESO. The thesis places emphasis on the theoretical analysis of ESO. On the basis of the principal theory of ESO, the thesis reviews its practice in China. In the end is a discussion of accounting for ESO .To make financial statement users understand items of ESO very well, the papergives some advices to deal with the accounting for ESO.The thesis consists of four chapters, which are as follows:Chapter 1 the Necessity of Promoting ESOOver the last decade, the relationship between managers and owners has been being explored by variant theories. Because of the separation of the management and ownership, how to coincide the interests of managers(as the agent) and owners(as the principal) has become a key issue for organization's survival and thriving. The factors affect managers' behaviors are derived both externally and internally. The external factors, such as those from market, legislation, combined with the factors from the internal control system, may form a monitoring and motivating mechanism to control the agency cost and improve organization's efficiency. As the internal control system has to take the corporate governance based on it. To achieve to effective corporate governance, ESO is the good measurements that coincide the specific organization's objective and strategy as well as manager's interest. Chapter 2 the Principal Theory of ESO The chapter is the theoretic basis of the whole thesis. It is divided into two sections. The first section is about the general explanation of ESO, including the necessity of promoting ESO, and explains the characters and the main steps: grant, vest, exercise, sale. Then the section compares ESO program with the stock , option and stock option ,in hopes of giving readers a clear picture of ESO. The second section analyzes the significance of ESO to Chinese listed companies, that is, the ESO could reduce the agent cost and outflow of cash, improve the long-term motivation issue, attract the excellent executives and improve the global economic competition, So the Chinese listed companies should carry out ESO.Chapter 3 titled as the Theoretic Basis of ESO The chapter tries to apply some useful economic theory in research of incentive measures to executives. The economic theories include Human capital, Corporate governance, Surrogate and Insider control. In the modern company, the separation of ownership and control results in the multi-level principal agent links. |
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