Executive Stock Option (ESO):

Since The Regulation of Equity Incentive in Listed Companies (Trial Implementation) was carried out by China Securities Regulatory Commission in January1,2006, Executive Stock Option (ESO) has being working as one of the Incentive Mechanism for Senior Executive formally in China. Undeniably, the implement of relative acts makes it possible to carry out several effective ESO plans to stimulate the hard-working of managers. However, we can also found such ESO plans which was worth abnormal trading values, just like the300-million ESO plan carried out by Yili Group. These make us doubtable that, ESO plan may have being designed as a hidden channel to transport interest to Senior Executives. By using less complicated executive conditions, easier performance conditions, and shorter term of validity, some ESO plan violate its initial purpose which is stimulating managers, but change to help get the rent of senior executives’power.In this background, this paper tries to find the real incentives behind the ESO plans, in the view of both "Best Contract Theory" and "Managerial Power Theory". Then in the framework of "Triple Protection", which is the theoretical premise of "Best Contract Theory", namely, independent board of directors, effective external market, and strict legal environment, we want to find the evidence that the restrict of Managerial Power can lead to the real incentive-orient ESO plan. Based on the "Triple Protection", we put forward three hypotheses. By collecting samples and building models, we want to prove that these hypotheses are tenable. If so, it is meaningful in both theory and practice that we refine the "Three Triple" to impose restrictions on the managerial power in order to carry out real incentive-orient ESO plan.