The Risk Control Of Equity Incentive For Yili Co., Ltd

With enterprise’ agency is separated from ownership, equity incentive is required tosolve the principal-agent problem between shareholders and managers more and moreextensively. But the equity incentive has great risk because of low vesting conditions andundemanding performance appraisals. How to identify, assess and control the risk in orderto achieve the incentive goal has vital significance to the enterprises in our country.In this thesis, the author takes Yili as the object to finish the equity incentive riskcontrol study. Yili is the first batch of enterprises which launched equity incentive plan.During this period, the supporting laws and regulations for equity incentive system ismaking step by step but still not perfect. In this condition, Yili’s equity incentive plan iscontroversial. This thesis makes the risk identification, risk assessment and risk controlanalysis for Yili’s equity incentive plan, so that the other listing corporations can get somereference from Yili, thus can promote much more listing corporations to formulate andimplement their equity incentive plan effectively. Firstly, the author introduces thedevelopment of equity incentive in China, including the influence of gradually completedand perfect laws and regulations brought to the implementation effect of the equityincentive. At the same time, the author sets forth the background and significance of thethesis. Secondly, the author introduces the basic theory of the equity incentive system,reviews the related basic economics and management theory of equity incentive, includingprincipal-agent theory, incentive theory and internal control theory. Next the authoranalysis the characteristics and risk identification of Yili’s equity inventive plan. Then theauthor makes the risk assessment of Yili’s equity incentive plan in both systematic risk andunsystematic risk perspective. Lastly, the author introduces the risk effect of equityincentive, including the systematic risk and unsystematic risk. In the equity incentive planand implementation process, the enterprise needs to make risk control from a lot of aspects, such as policy risks, regulating the securities market, restricting the manager market,perfecting the tax system, standardizing corporate governance, improving the constructionof equity incentive, salary system design and control, and performance constraints. Thesestudies help listing corporation motivate their managers effectively, achieve a win-wingoal among the shareholders, managers and investors.