Analysis Of Equity Incentive Program’s Design Of Gemdale Corporation In 2010

In China, the development of real estate enterprises is affected by the macroeconomic environment and national macro-control policies. However, most enterprises copy equity incentive programs from those foreign companies, without considering their own situation, which leads to failure of effective implementation of these plans. In 2010, Gemdale Corporation restarted the equity incentive plan which was divided into five sections. After all, only 40% of the stock options are valid. Options which meet the requirement between 2010 and 2012, can only be exercised in 2014. Sometimes, the stock price is even lower than the exercise price. The turnover rate increases during this period. Previously, there were 214 core employees who should receive options, but now there are only 130 of them are staying here. Being interviewed, those resigning staff stated that this kind of incentive is meaningless and will not affect their decision. Also some of them believe that employers should work out a visible bonus for their hard-working employees after several years. Therefore, the equity incentive plan cannot well incent the staff. After investigation, we find out that some incentive objects affect the implementation of the equity incentive by the dividend distribution. Simplex incentive manners, simple KPI and lack of considering enterprise life cycle cause the unfair distribution among senior executives in the company. Moreover, key staff receive low ratio of the options. All of them have a negative influence on the incentive program. After analysis, we believe that incentive objectives should avoid working out the stock options policy. Application of stock appreciation rights, phantom stocks, restricted stocks, non-financial indicators and industry indicators into the effectiveness of options can help improving the equity incentive plan.