Manager Stock Options: The American Experience And Practice

One of the key problems that modern enterprises want to resolve is the incentive problem,namely, harmonize the benefits conflicting and the target inconformity between the employee,the executive and the owner, and finally solve the basic motive force of enterprise's development.But the core of the problem is to encourage the manager, because the manager's rareness and innovative characteristics make the manager's function more and more important.The executive incentive problem has always been the focal and difficult point of the enterprise reform. Most companies implement traditional salary systems which mainly use wages and bonus.This kind of salary system not only lacks encouragement function but also may lead executive's short-term behavior.In order to reshape the manager's long-term incentive system, it is necessary to introduce the executive stock option system in present condition.As a long-term incentive system,the ESO has produced enormous encouragement to the economy of U.S.A. over the past 20 years.The executive stock option(ESO) means that the company awards a kind of right to a manager, allows him to buy the company's stock according to a certain pre-arranged price within appointed time.Before buying stocks, the ESO will not bring any cash income to the manager.After carrying out the ESO, the ESO income of the manager reflect the margin between the pre-arranged price and the market price of the stock in the day when the manager carrys out the ESO.The ESO can combine the enterprise's long-term benefits with the manager's individual benefits.It can impel the manager to pay more attention to the long-term development of enterprises.This thesis proceeds with analysis of the economics angle at first, offering the solid foundation in the theory for the implementation of ESO.Secondly because the design of ESO is an exquisite, complicated course, it must be on the basis of the existing theory and experience (especially in the U.S.A. ). The whole thesis is divided into four chapters:Chapter One, it mainly introduces the concept,characteristics and incentive principle of the ESO.ESO's most function is to encourage the manager according to the enterprise development achievement. The core of this kind of means lies in:through transforming the manager into company's shareholders, combine the manager's banefits with the campany's stock price,and then make campany's profit and shareholder's value become consistent. The ESO has three characteristics:Right with not duty, prospective earnings, income and risk co-existence, such characteristics makes the ESO apply to the long-term incentive of enterprises. The function mechanism of ESO is:the subjective factors of The manager such as the individual ability and diligent degree,etc. has determined his contribution to the company;It influences the long-term achievement of the company;The long-term achievement of the company is reflected through the stock price on the capital market; The fluctuations of the stock price have determined the level of executive's income. The higher the relevant degree among diligent degree, accomplishment, stock price, and remunerate,the better the result of the encouraging mechanism, ESO's purpose is to realize system design through a whole set of exquisite links. Chapter two is a theoretical foundation of this thesis, it is also a economics foundation of implementation of ESO. Here, the writer combines the principal-agent theory, team theory, contract theory and human capital theory, analyzes in detail how these theories are shown in the ESO. The development in modern enterprise theories has promoted enterprise's incentive mechanism.The research discovers that the enterprise is not a complete contractual combination.On the one hand, because of the impartible of the output, each member's individual contribution is impossible to be decomposed or observed, therefore, it is impossible to pay the remuneration according to everybody's true contribution.On the other hand, because of the separation of the operation...