Options To Corporate Managers Incentives

In the United States, firms are using stock options more frequently and in sharply large quantities than just a decade ago. This trend is particular significant for high tech companies, such as Microsoft and Ebay. This great change can amalgamate employee's benefit with company's interest and reduce company's principal-agent cost remarkably. While in China, for the limitation of law system, stock options are scarcely used by the listed companies. As China has entered into WTO, China's listed companies will face more rigorous competition from inland and abroad. It's urgent and very necessary for China to loosen policy restriction and allow the listed companies using stock options and other stock-based employee compensation plans to motivate and detain their employee, especially senior managers and key technicians.This paper analyses mostly the stock options in the United States and in China. It is organized into four chapters.Chapter 1 introduces the concept, history, type and characteristics of the option as a financial innovation tool.Chapter 2 brings in the concept of the stock options, includes the situation of stock options in major countries around the world and it's development trend.Chapter 3 describes a normal stock option plan of American, which content covers from the type, management system, system of accounting to practical effect.Chapter 4 is the last part. At first, it tells the present situation of the stock options in China; then comparing with the stock options in American, it discusses the problem that will encounter when China company implementing the stock options; at last, the author brings up some individual suggestion.