On The Design Of Equity Incentive Mechanism Of Shanghai Jahwa United Co.,Ltd.

Equity incentive helps to solve the problems caused by asymmetrical information between the shareholders and the managers in listed companies, which can maximaize the enthusiasm of managers. However, many equity incentive mechanism implemented by listed companies still have problems. A few managers would manipulate stock price and distort finanical data, in order to improve their own income, which would affect or damage company’s long term interests. Currently, the equity incentive mechanism of Shanghai Jahwa Corporation presents a number of urgent problems to be solved: the turnover rate of senior management is high, the accounting information could not reflect the actual value of the company, and so on. Hence, it’s imminent to introduce a better and more thorough and fair equity incentive mechanism, to make managers share the risk and resutls of operation with shareholders. Shareholders vital interests and company’s long-term interests should be considered before making any operation decisions.To begin with, this article analyzes the reasons why Jahwa needs a new equity incentive mechanism, and introduces Economic Value Added(EVA) theory to analyze the advantages and disadvantages of equity incentive mechanism currently presented among domestic companies, and to find out the flaws of traditional equity incentive mechanism. After that, the author analyzes the component elements in EVA and makes the necessary accounting adjustments. Based on EVA theory, the author starts to anlayze the problems of Jahwa’s equtiy incentive mechanism. For example, the existing equity incentive programs have a poor long-term incentive effect, performance assessment index distortion, executives leave and other issues and finds out EVA-based equity incentive mechanism is more superior and the achievement assessment theory is more practical in China. Finally, from the model, scope, exercise price, size and other aspects, this article designs a new equtiy incentive mechanism based on EVA-salary stimulation model and the needs of Jahwa. After comparing with the original mechanism, the new mechanism proves to solve the current problems more effectively and could maixize the consistent profit of shareowners and managers. Directly through different years of data to get different results. This article provides a reference and support to domestic listed companies when implementing equity incentive mechanism, helps them to use advanced western incentive system and assessment standards to better construct and develops the business.