Analysis On Listed Companies’ Equity Incentive Design In China

In recent years, the equity incentive plan of listed companies is developing very rapidly in China, the number of listed company to use the equity incentive has increased year by year. However, many companies choose equity incentive plans which aren’t suitable for their development, in the lack of basic and investigation to fully understand the economic environment. These plans finally became a kind of welfare or the pressures to perform, leading to the failure.This paper mainly consider how the listed companies to set the equity incentive plan. It analyzes the theoretical basis about the equity incentive firstly, and then summarizes the literature review about equity incentive plan. Then we summarize about the five basic conditions of equity incentive plan settings. Followed by an analysis of China’s 2005-2014 listed companies equity incentive programme.This paper choose ZOOMLION’s equity incentive programme which was publiced in 2013 then failed in 2014 as a case study. The study found that, ZOOMLION’s equity incentive set up reasonably, Punitive measures is the bright spot, it is worth reference to other listed companies.The inadequacy of the equity incentive include that grant price lost motivation effect and the single company performance indicators can’t reflect the contribution of executives. Despite the restriction of macro environment, ignoring the law of development of the industry situation, choosing equity incentive blindly caused the failure of equity incentive plan..With this case study, this paper show the enlightenments about the setting of equity incentive elements,the motivation of equity incentive and the timing of equity incentive,and provide the listed companies with reference.