Bonus System Reform Of M Iron&Steel Group Based On EVA System

In the late1990s, the Economic put forward a special concept, it is "Value-Based Management". VBM contributes to creating a new value-based system, so as to improve the communication between corporate headquarters and business units and formulate the VBM corporate culture, the goal of which is maximizing shareholder’s value. The application of EVA is the core and prerequisite for VBM. EVA-based bonus system is conducive to the protection of shareholder interests and long-term interests of the enterprise. The main body of this paper is divided into the following sections:The paper first introduces the theory of VBM and relative theories. In this paper, the definition of "Value Based Management (VBM)" is a business concept and Management model whose goal is creating value for shareholders. With the development of the market, more companies emphasize the goal of maximizing shareholders’value, and gradually improve the financial and management system. In the VBM system, EVA measurement can define how much value the enterprise creates and adjust the unscientific part of original accounting system. EVA-based bonus system will help the enterprise to establish and improve the growth system of talent. This section also illustrates the evolution of the corporate values, as well as a brief introduction of its key area:EVA.Then the paper introduces how to establish the VBM system. The enterprise elaborates the essence of value management system by measurement, management, motivation and mindset. Value management mode is able to apply to every aspect of value chain. It is necessary for the enterprise to conduct a comprehensive organizational reform so as to establish a VBM mode based on EVA.The third part mainly introduces bonus design based on EVA. This design includes the establishment of bonus system, bonus bank and leverage stock option system of EVA. In the leverage stock option system, managers will use the EVA bonus to buy stock options and the quantity is determined by bonus. They can get stock options based on the market price and the annual exercising price changes according to EVA. At last, the paper analyzes how to build the VBM system and the application of bonus design in M Iron&Steel Group Co.LTD. This section discusses concretely the procedure of VBM system and bonus reform in the group, focuses on how to develop the manager’s EVA bonus. The important step of reform is to develop a reasonable bonus system for enterprise managers. This section formulates the procedure of bonus reform in M Iron&Steel Group Co.LTD., introduces the focal point of reform by the example of managers’bonus. Finally, the section emphasizes on the critical step in the bonus reform based on the circumstances of M Iron&Steel Group Co.LTD.