Study On Equity Incentive Of Listed Companies In China

In the1980s, with the smoothly development of the shareholding system reform, equity incentive as part of the corporate governance began to bud in the land of China. Internal staff shares is the original form of equity incentive in our country, since characteristics of welfare color and lack of incentive features, it is not a real sense of equity incentive. After clearing the legal obstacles of equity incentive, under the background of steady development of securities market, securities regulatory commission on December31st2005issued the measures for the management of the listed company equity incentive (hereinafter referred to as the" management method "), so far our country has finally started the construction of equity incentive system. Then in a few years, the increasingly development of accounting standards, taxation and other relevant system construction vigorously promoted the development of equity incentive system in our country.There is no denying the fact that the implementation of equity incentive system in China have played a positive role on the management of listed companies. However, the internal governance structure of listed companies is still not perfect, there are many problems, such as the high ownership concentration lead to power unbalance between large shareholders and minority shareholders, the weak effect of board of directors system result in residual control under the imbalance game, agency chain of state-owned assets management mechanism is too long, and insider control problem, etc. In addition, our country has not yet formed the professional manager market, the development of capital and product market still is not perfected, some part of relevant laws and regulations are still unreasonable, so that the external market governance and constraints system for enterprise is not in place, which strengthen the contradiction between the equity incentive mechanism and existing system environment.The lack of internal and external constraint mechanism lead to the implementation of equity incentive of listed companies in our country have some problem, which also caused some controversy. In this paper, three questions will be discussed as the research clue:(1) Whether the implement of equity incentive produce positive effects on construction of corporate governance mechanism, whether to have a positive impact on the company’s operating performance;(2) Whether the equity incentive have transformed to a part of agency problem and become the way for top executives to seek personal gain;(3) How to solve the problems from implementation of equity incentive (eg. exercise threshold is too low, period of validity is too short and timing behavior, etc.). In this paper, on the basis of summarizing the practical experience foreign and our countries, focusing on applied analysis of the equity incentive in China, starting from the design and implementation of equity incentive plan, equity incentive system construction, the internal governance structure of listed companies and the external governance environment, to put forward rationalization proposal regulate the behavior of the implementation of equity incentive of listed companies in China.