Research On The Vesting Condition Of Stock Incentive Compensation In Listed Company

Stock Incentive Compensation is a typical long-term incentive system. In this system, equity instruments are granted to managers, enabling them to share the interests brought by stock price grow. Since the personal interests of managers is integrate with the interests of the company owners,"agency risk" is effectively reduced, which is beneficial for the long-term stable development of a company. The Securities Regulatory Commission issued " The listed company equity incentive management approach" early in2006, since then, lager number of Chinese listed companies have put Stock Incentive Compensation method into practice, the total proportion of which has reached to12.75%in May2013. However, Stock Incentive Compensation plans have been revoked frequently in these days, shadowing the prospect of the Stock Incentive Compensation. There are two major reasons. First, the stock price falls below the exercise price, in which condition exercise become meaningless. Second, company performances fail to reach the vesting conditions, preventing managers from exercising option or unlocking restricted stock. Therefore, it is urgent to find out factors that block the exercising process.A typical Stock Incentive Compensation plan usually has four steps:grant, vesting, exercise and sell. Vesting condition is vital for it determine whether the option can be exercised. So vesting condition is chosen as the core factor to study Stock Incentive Compensation plan. Base on the vesting condition designing mode, a statistical analysis is formed using samples of revoked incentive plans in2011-2013, the analysis showed that, many vesting conditions are poorly designed with single performance standard. According to that, advices have been given to help later companies in their vesting condition designing.