Analysis On Equity Incentive Of Jiujiang Zhengde Investment Group Ltd.

The separation of the modern corporate ownership and control causes agency costs.Although the equity incentive has widely implemented in many enterprises at home andabroad as a long-term incentives to reduce the agency costs, however, the opinion aboutthe equity incentive effect has not reached a consensus. Especially in non-listed companies,the non-marketable stock lead to more particularity of its stock options study.Based on this, the paper uses the case study method and take Jiangxi JiuJiangZhengDe Co., Ltd. for example to explore the virtual stock option plan for non-listedcompanies. The paper firstly describes the background of implementing equity incentivein JiuJiang ZhengDe Co., Ltd. Then, the company decides to implement a virtual stockoption plan. The author introduces the virtual stock option plan in JiuJiang ZhengDe andmeasures the equity incentive effect in three aspects which are company performance,human capital and industry competitiveness. Study suggests that the company stock optionplan has not achieved the desired results. Next, for the fact of ineffective incentiveintroduced in the previous chapter, the paper studies the equity incentive plan of thecompany in the opinion of contract elements and governance environment. About thecontract elements, the author found there exist the short term of option period, the ESO arenot granted to the right persons and the persons also do not have the reasonable quantity,the extraction of incentive fund is very casual, the prices involved in the stock option arenot reasonable. In addition to these, the stock option don not set the exercise conditions.All these factors make stock options become a tool for managers to increase their benefits.About the corporate governance, it found the corporate existshigh ownership concentration in which the largest shareholder makes every decision. Theboard of directors and supervisors are not set rationally and the stock option is notdiscussed deeply by the two boards. Moreover, the monetary compensation is low,on-the-job consumption level is higher. At last, the author puts forward some suggestionsto improve the effect of equity incentive in JiuJiang ZhengDe Co., Ltd, which alsoprovides a reference for the non-listed companies who are planning to implement the equity incentive.In this paper, the author found that the stock options not only can become a goldenhandcuffs incentive, it also can be used by the management; Stock option is affected bycontract elements and the implementation of the contract; The corporate governancemakes effect for the incentive, therefore the governance is the premise of theimplementation of equity incentive smoothly.