EVA-based Top-manager Compensation Incentive Mechanism In The Self-owned System Of M Auto Group

Currently, the M Auto Group is faced with a critical period featuringstrengthened construction of self-owned system and overall listing, a periodwitnessing the slow growth of national economy. As the rarest corporate resource,outstanding top managers are playing a predominant role in promoting the enterprisedevelopment. Thus how to provide compensation incentive for top managers hasbecome an issue of corporate development strategy. To survive the competition causedby market internationalization and economic globalization, this Group, a state-ownedlarge vehicle manufacturer, must establish a scientific compensation incentivemechanism for top managers and a corresponding performance evaluation system. Inview of this, the Group has made initial effective attempt in stimulating companymanagers, but still lags far behind other mature enterprises, in particular in terms ofthe construction of compensation incentive mechanism. This is mainly manifested inthe following aspects. The structure of annual salary is single, failing to reflect thescale and feature of corporate operation. Average annual salary of top managers isbasically satisfactory but without wide gaps between different posts, thus creating lesseffective stimulation on key posts. Post grading is less scientific, emphasizing moreon paying the staff on post. The company lacks the driving force behind itssustainable development due to oversize short-term incentive and inadequate mediumand long-term incentives.Therefore, this article has, based on the study on the theoretical system ofcompany’s economic value added （EVA）and its management mode, compared thecalculated EVA results of self-owned and joint venture systems in view of actualoperation of self-owned subsidiaries of this Group. Here an overall analysis has beenmade on the company’s comprehensive performance evaluation system based onbalanced score card （BSC）and the top-manager salary incentive mechanism in theself-owned system. This article has also summarized domestic and overseasexperience that can serve as a reference. In combination with the demands ofcorporate operating mode and self-owned development strategy after the overalllisting of M Auto Group, it suggests that the EVA shall be included into BSC performance appraisal system. While applying the EVA theory into a tenure incentivemechanism for top managers in the self-owned system, it attempts to establish astock-right incentive plan to tune the performance-salary relation of operators so as toset up a sound, scientific incentive and constraint mechanism for capital operation.