Study On Executive Stock Option Incentive Model In China Based On EVA

In this paper we are concerned of the incentive mechanism of executive stock options. It has been widely used in corporations of western countries to incentive the high-level executives. While from theoretical research to trial application in a small area, by far we have only made the first step towards the establishment of the incentive mechanism of ESO in our country and there are still a lot of difficulties and problems. One of the most important problems is that the items concerning the circulation of stock has strictly affect the implement of ESO and the other one is the low-efficient of our stock market.To resolve these difficulties, this paper establishes an incentive mechanism of phantom stock option based on the economic value added. This mechanism has enhanced the interrelation between the income and the achievement of administrators and cull the influence of the stock market and the paper has proved that this mechanism can be used in practice through calculation. These issues will be of great help to promote its development in China.Our main contributions are as follow: The introduction of EVA to this mechanism has overcome the defect of the stock price and the expected improvement of shareholders is added into the mechanism as a constraint to the executives.