Analysis Of Stock Equity Incentive In Listed Company

In China, the listed companies never designed the long term incentive mechanism to motive the top managers. So the top managers make decisions from their own interests and it’s easy to harm the interests of shareholders. So stock equity incentive plan is widely used in the listed companies, because it can tie the wealth of top managers to shareholders’wealth, and it also can effectively improve those companies’internal structure, make the managers to maximize shareholders’ profit and fully mobilize the enthusiasm and creativity of the top managers to enhance the corporation’s value. And, in the early stages or growing up, some listed companies don’t have the perfect salary system and assessment criteria, so it is very difficult to attract or retain talents, which affecting the company’s long-term development. Therefore, how to attract and retain talents have become the key issues to the development of the listed companies. In early2006, the Chinese Securities Regulatory Commission had issued the’Measures for the Administration of Equity Incentive Plans of Listed Companies’. Stock equity incentive plan gradually becomes the most important method to inspire and constrain the top managers of the listed companies and therefore attracts more and more attention from theorists and business circles.Taking Suning Appliance Group’s stock equity incentive plan for example, this paper analyses the details of the company’s stock equity incentive plan, such as the source of stock, the exercise standard, the exercise price, the incentive target, the shares conditions etc. Then the paper analyses the reason that it takes the plan and its performance after the implementation of the stock equity incentive plan, comparing the financial data with GOME’s, its main market competitor in China. The result shows that the plan improves its performance and market competitiveness prominently. At last, the paper explains the problems of the plan. It reveals that, to achieve the ideal effect of incentives and constraints, we must firstly identify the best time, and secondly, it should be based on China’s economic environment, and the specific conditions of the company to design the plan. Finally, there are some inadequacies of Suning’s stock equity incentive plan, so this paper presents recommendations for improvement.This paper is divided into the seven parts as follows:First part is about the background, significance, the main idea and the framework of the research.Second part reviews the literature about the stock equity incentive at home and abroad to know the study in all aspects, and is familiar with the history and current situation of the stock equity incentive. The content of the paper is raised.Third part discusses the principal-agent and human capital theory which the stock equity incentive is based on. Make the top managers and shareholders share the company’s residual income is a common feature of the two theories.Fourth part is a case description of Suning, about its development, financial situation, prospects, governance structure. And it also analyses its remuneration status, funding problem and it’s necessary to carry out the plan.Fifth part introduces the plan and analyses its implementation effect, making a contrast with GOME’s to find out it improves its performance and market competitiveness.Sixth part analyses the elements of the plan, such as the source of stock, the exercise standard and the exercise price to find out the root problem of the plan and give some suggestion of improvement.Seventh section is the conclusion and outlook of the study.The contribution of the paper:the article about the elements of stock equity incentive is shortage. According to analyze the elements of Suning’s stock equity incentive plan, this paper finds out the root problem of the plan and give some suggestion of improvement. So it provides a reference for design and implementation of stock equity incentive plan for the listed companies, and some new ideas for future research.The lack of the paper:this paper only makes a qualitative analysis for the elements of this program, without a mathematical model to the deduction process for the design elements. A quantifiable method to solve such problems is still needed for the company.