The Study On The Effect And Issues Of Executive Equity Incentive Implementation

With the accelerating process of the Chinese market, and the further separation in ownership and management of enterprises, the principal-agent problem has become a very important aspect of corporate governance issues. For the state-owned enterprises listed companies, the long-term absence of the owner and the too large right of the manager have lead to a result that the principal-agent problem is particularly prominent. Equity incentive, as a long-term incentive and restraint mechanisms, is considered to be an effective way to solve the problem of inconsistency between the interests of managers and shareholders. Equity incentive enable managers to share interests and risks with shareholders by granting shares to them, and can avoid the managers to damage the interests of shareholders for the purpose of maximizing their own interests. In the middle of the 20th century, the United States took the lead in the exploration of executive equity incentive In the early 1990s, China’s enterprises gradually introduced incentive, but the development of equity incentives in China has not been smooth. There have been many problems in the use of equity incentive by the listed companies of China. We have a series of questions which are worth thinking about in our country, such as whether equity incentives can bring positive effects for the company’s development how to organize the equity incentive system, how to supervise the excitation process, how to set up evaluating indicators and so on.This article selects the equity incentive plan announced in 2006 and 2010 of LZLJ CO., LTD, describes the specific content of the two equity incentive program and the implementation of the 2010 equity incentive plan. Then compare the operating results of the implementation of LZLJ equity incentive before and after, and take the operating results of LZLJ Corporation from 2009 to 2012 with the industry leader Mao-tai, a direct competitor Yang he comparing operating results in the corresponding year to analyzed the effect of the equity incentive plan of LZLJ in 2010 systematically. Through analysis the equity incentive case of LZLJ, we found that the company’s 2010 equity incentive plan based on the 2006 program has done a great degree of improvement, but there are still some deficiencies, such as the unreasonable set of vesting conditions, the unreasonable arrangements of equity, the inadequate of corporate governance structure and so on. Give recommendations to these issues, in order to improve the equity incentive plan of LZLJ Corporation and provide a reference for the companies which want to implement equity incentive plan.