Research On The Legal Issues Of Stock Option

Stock option was established in the forties and fifties of the UnitedStates which makes a connection between future earnings of employees andthe integral achievements of enterprises, and effectively motivatesemployees to work hard in order to achieve the maximization of corporatevalue. Foreign Practice has proved that the Stock option system as anincentive has an effect on attraction of stable personnel, prevention ofthe short-term behaviour of company managers and reduction of the costof company incentives.The stock option’s practices in China were formally established inthe early1990s, and since then, the stock option system has been theexample for hundreds of companies to follow. In2005, the China SecuritiesRegulatory Commission promulgated "the Measure on Equity IncentiveManagement of Listed Companies". Meanwhile, the Amendment of the "companylaw","Securities law" and the promulgation of equity incentive,especially the promulgation of the tax system in terms of stock optionplan and accounting policy, has strongly improved the development of thestock option System in China.But according to the investigation the writer learned, there are acertain amount of legal obstacles in our implementation of the process of the stock option incentive system, both in trial practice and in thecompany aspects. Therefore, this thesis attempts to analysis the essenceand value of stock options and the internal and external environment forChina to implement and finally to make some guided recommendations toChina’s stock option law system. The writer hopes that this thesis canmake some helps to the Stock option’s implementation in China.The whole thesis is divided into four chapters as follows:Chapter1analyses the background of the Stock option theory as wellas the common types and their derivatives and introduces the legal natureand feature of the Stock option.Chapter2analyses and summarizes, from the view of empirical analysis,the legal issues arising out of the process of implementation of stockoption system in China namely when enterprises implement the stock optionsystem and the courts at each levels handle the cases concerning stockoption.Chapter3introduces the stock option’s legal system of the UnitedStates and Japan and compares which with the current legislation of Chinain order to raise some legal issues in stock sources, tax policies andother aspects.Chapter4is based on the analysis of Chapter2and Chapter3andprovides some suggestions to form a good environment for Stock optionsystem.