Discussion About Equity Incentives In State-owned Listed Companies

With the rapid development of market economy in our country, a lot ofstated-owned companies promote the reform of shareholding in order to in line withmodern enterprise system. In modern enterprise system, the separation of owner andoperator bring about the principal-agent relationship, principal-agent relationship lead tothe problem of equity incentive. The effect of equity incentive of stated-ownedenterprises is not very good. Under China’s special economic system there are lots ofproblems, such as Shares of equity incentive source is limited, management control ondesign and implementation, trigger Moral Hazard, give rise to malapportioned,long-term incentive effect is not obvious and so on. State-owned enterprise managers’salary is composed of basic salary and fixed bonus. State-owned enterprise managers’salary is lack of long-term incentive mechanism. Divorced from income of thestate-owned enterprise managers and corporate performance, resulting in the power ofmanagers strive to enhance corporate performance is obviously insufficient, even lead tothe problem of adverse selection and moral hazard.Under our existing economic system, the equity incentives in state-owned listedcompanies flawed. How to properly resolve this issue and how to promote the rapiddevelopment of the state-owned listed companies there has always been controversial.Study of the problem of equity incentives in state-owned listed companies not only hasimportant theoretical significance, but also has considerable practical value inimproving the performance of state-owned listed companies.This thesis is in reference to the foreign literature and domestic literature, thinkingthe significance of the improvement of equity incentives in state-owned listedcompanies. This thesis analyzed the implementation, problems exist and causes ofEquity Incentive in state-owned listed companies and analyzed the experience of equityincentive in western developed countries. Finally, this thesis discussed how to improvethe state-owned listed company equity incentives from macro and micro level. I hope tobe able to benefit from it.This thesis use of the following writing methods: the normative analysis method,the logical analysis method, the comparative analysis method, the qualitative analysismethod. Normative analysis method is based on a certain value judgments as a startingpoint and proposed behavior standard, this thesis uses normative analysis of the equityincentive theory. Logical analysis method is conducive to the same question in depth, this thesis use logical analysis of implementation, problems Exist and causes of equityincentive in state-owned listed companies. This thesis uses comparative analysis methodto draw experiences and references of equity incentive in western developed countries.This thesis is qualitative analysis of how to improve the state-owned listed companyequity incentives from macro and micro level.The thesis has five sections. The first section begins with the overview of thebackground and significance, and then briefly foreign literature and domestic literatureresearch and introduced the idea of writing papers, and introduce the basic frameworkof the thesis. The second section introduces basic theory of equity incentive, the modelof equity incentive and its theoretical basis. Equity Incentive contains principal-agenttheory, property rights theory, human capital theory and incentive theory. The thirdsection analyzed the implementation, problems exist and causes of equity incentive instate-owned listed companies. The fourth section analyzed the experience of equityincentive in western developed countries. The fifth section discussed how to improvethe state-owned listed company equity incentives from macro and micro level.Although equity incentives in stated-owned listed company in continuousimprovement, but there still are a lot of problems, such as shares of equity incentivesource is limited, management control on design and implementation, trigger moralhazard, give rise to malapportioned, long-term incentive effect is not obvious and so on.There are many reasons, such as the largest shareholder vacancy lead managers tomanipulate equity incentive program, unscientific performance appraisal, deficiency ofcompetitive managerial labor market, imperfect of equity incentive supervisionmechanism, the weak effectiveness of capital market and so on. We can get someexperiences from the references of equity incentive in western developed countries,such as more cautions needed over Using Stock option, diversification of EquityIncentive model, combine equity incentive with other Incentive Methods and so on.Different state-owned listed companies also have their own characteristics, thestate-owned listed companies should have their own focus in the design andimplementation of equity incentive programs.In short, state-owned listed companies should be aware of their own problems, andfind out the reason, design reasonable equity incentive program to achieve sustainabledevelopment. Whether it is relevant departments or state-owned listed companiesshould make due efforts.