The Impact Of Different Property Rights To The Motivation And Validity Of Incentive

Equity incentive is very important in companies in some particular ways. It is of great significance to coordinate the conflicted interests between the shareholders of the companies and the managements of the companies. Equity incentive helps to promote the performance of long time development of corporations. Equity incentive takes a key role at a position that is very important to attract and retain the core talented people and those capabilities people as well. Equity incentive is a compensation system, it helps to reduce or solve the classic problem of principal and agent relationship that is their interests can’t be on the same line. Equity incentive has been used around the world at this moment. There are so many successful cases of using equity incentive through the United States of America and many European counties, and equity incentive program provide energy for the companies to the long time development. However, at present, equity incentive program is still a new thing in China, it is still at the first stage of development level, which is totally left behind by the advanced countries so far away. Although equity incentive program has lots of good trends in China, but there are still some problems to be solved and risks to be handled in this field. In order to know the effects of equity incentive under different background, this paper selected Shanghai Jawha as an example, to analysis three different equity incentives during the 10 years started from 2007 to 2016, each equity incentives under different corporation background like state-owned enterprise and private enterprise, to compare the variables of different design, implementation, motivation and validity under different backgrounds. We want to find out the impact of different property rights to the motivation and validity of incentive by the case of Shanghai Jawha.In order to understand the case better and through, this paper use many methods to study the case, such as the case analysis method, the literature research method, the comparative analysis method and a lot of other research methods. Take the research of previous equity incentive plans of Shanghai Jawha as foundation, I found out that during the moment when the company was a state-owned enterprise, the first equity incentive plan of Shanghai Jawha in 2007 which should be an incentive method then tended to lean upon a kind of welfare distribution system. When the company was in the situation of state-owned, the equity incentive was designed for the core management, the scheme is really out of reasonable explanation, the acting plan was put into action far behind the deadline. And right after the introduction of the program, the figure of cumulative abnormal return is even negative, which showed that the plan is not welcomed by the stock market and investors don’t believe that the equity incentive plan could bring good performance for the company. In the mean while, the performance of the enterprise is on a really weird big leap when the program was put forward. It is so unusual that can not make people stop thinking of the possibility that the managements of the company was controlling the performance of enterprise in order to get their equity reward form the equity incentive plan. In general, this equity incentive plan is a little bit like welfare distribution for the managements and did not achieve the original goals as the enterprise put. After the transformation of Shanghai Jawha from a state-owned enterprise to a private company in 2011, here comes to the second equity incentive program in 2012. And then the enterprise switched its core managements, the old president of the board and the general manager left the company in 2013 and 2014, here comes to the third equity incentive program in 2014 and 2015. At this time, the shareholders will have more influence over the company and control the equity incentives program, and the motivation and validity of incentive also changed as well. Right after comparing the details of these three different equity incentive programs, the later two programs are more scientific in the ways of design and covered more people. Motivationally, it showed stronger quality of incentive, and it has far more obvious effects on the performance and share price.Through the study of the case of Shanghai Jawha, I, the writer of this paper, found out that the effects of implementation of equity incentives vary from different property background, including the reason to implement the program and the problems and difficulties the company may face. For shanghai Jawha itself, it is no doubt that equity incentive is a brilliant system to solve the problem of interest conflict between the principals and the agents. But the real problem is how to make equity incentive program really being useful and do not being manipulated by the management, and make it beneficial to the both side of principals and agents. It required to improve and to raise the stress of internal governance and external regulation. And the supervised department should take each equity incentive under different property rights background different instead of taking them the same. And different supervise ways and the settings of policy shall be made to help the supervision. At the last part or chapter of this paper of equity incentives, I gave some of my own advice about how to implement the equity incentive programs better from internal governance and outside supervision. From the angle of academic, this paper provides solid evidence of different performance of enterprises under different property right background. It could be a better option to divide equity incentives under different background when we research the theory of equity incentive in empirical research. Although the case of Shanghai Jawha is an individual case, but it shows the difference of characteristic of equity incentives. I hope that this paper can provide some reference and evidence for the research and market practice in the later days. Of course, as for the popularization and universality of the conclusion, are still waiting for more empirical studies to prove it in the future.