Stock Options: Incentive Mechanism Of The New Model

Human resources have subsided the strategic places of material resources in modern enterprises. Especially the executive managers in modern business enterprise play a very important role and prominent function.The important characteristic of the modern company system of business enterprises is the separation between ownership and operation right. It is essencial for the enterprises to motivate the executive managers and use their potencial capabilitilies.The question that how to encourage the managers becomes one of the modern enterprise theory's key questions. Having experienced more than twenty years of reformation, state-owned enterprises have made much effort in improving manager stimulation system, and also gained some achievement to certain degree. But generally speaking, up to now, effective manager stimulation system has not been set up, the disadvantage of insufficient stimulation and ineffective restraint has always restricted the development of state-owned enterprise.The incentive mechanism adopted by state-owned enterprises today still can't meet with the changing needs. The"Agent Problem"remains unsolved.Executive Stock Option (ESO) is an incentive system formed in the enterprise management after introducing the concept of Stock Option, refers to a type of right for managers from enterprise owners to claim certain quantity of general stocks at a previously determined price within the agreed period. It can be said to be an innovation of assignment.ESO plays an important role in executive managers 's incentives since it appeared in the middle of 20th century . The idea behind stock options is to align incentives between the managers and shareholders of a company. It matches the power of"surplus control"with the power of"residual claim"by letting the executive mangers participate in the distribution of residual claim, consequently enabling manager's benefit goal to be most consistent with the enterprise shareholders' wealth...