Study On The Effect Of Equity Incentive

With the development of modern enterprise, the contradictions between trust and proxy have become increasingly prominent, equity incentives are used by more and more enterprises to be an important solution for this conflict, and company managers pay more attention to the long term sustainable healthy development of enterprises. Generation and application of the equity incentive could make managers and operators have the same goal, thus to avoid some behavior to some extent, such as the increasing of agency cost, on-the-job consumption and the risk of moral hazard; On the other hand, the implementation of equity incentive can also help enterprises to build a sustainable team of core managers and technical personnel.On the American and European capital markets, equity incentive is already widely used and has relatively mature achievement, while in China it started in 2006 and is still in the initial stage of exploration. Our exploration for equity incentive has been continuing since 2006, but we still could not get a unified conclusion and its effective is not as good as imagined. Nevertheless, according to reaction of capital market to equity incentive and research of scholars, we can draw the conclusion that we should hold positive attitude towards the equity incentive and it should be widely used to avoid short-term effect of companies. Furthermore, equity incentive will become an important part of corporate governance for all public companies as a long-term incentive mechanism.This article analyses the equity incentive plan of Hisense corporation, summarizes its advantages and disadvantages, and according to the characteristics of the incentive scheme and national conditions of our country puts forward related suggestions, give references to the implementation of equity incentive for the other public companies.