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Problem Study On The Stock Incentive Plan Of Gree Appliance Inc

Posted on:2017-05-10Degree:MasterType:Thesis
Country:ChinaCandidate:X ZouFull Text:PDF
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Equity incentive plan refers to the case where managers and key employees who succeed in driving companies realizing the target profit will be awarded ownership.They can enjoy residual claim and take certain risk.This system effectively arouse the enthusiasm of employees and stimulate them to create.It binds the long-term interests of company and personal interests of employees to reduce agency costs due to information asymmetry.This system emerged in the mid-1980 s with popularity among American companies.Equity incentive made an important contribution to its economic growth.Developing countries were also affected and began to establish or improve their equity incentive system.In China,equity incentive began in the 1990 s,seriously lagging behind compared with other developing countries.Chinese theoretical studies in this area mainly focused on the performance indicator selection,the relationship between equity incentive and corporate performance and the like.In practice,the use of equity incentive is still immature,lacking the case of in the current policy environment companies launching standard stock incentive plan.With the expansion of scale of company,principal-agent problem has been more and more serious coupled with asymmetric information and moral hazard problems.Equity incentive will become an important system to stimulate and constraint.This paper describes background and significance of the research,and reviews the study of international and domestic scholars on equity incentive,then introduces relevant concepts and theories to analyze the equity incentive plan of Gree Electric Appliance Inc..In this case,the company expanded the incentive scale yearly and tended to the middle,the backbone and the senior executives of its subsidiaries,which helped build up fair competitive environment and mobilize the enthusiasm of staff.In the selection of incentives,this article analyzes incentive modes by comparing the restricted stock with the stock option and the phantom stock respectively.The Gree chose the restricted stock with smaller risk.Other companies should adopt appropriate incentive mode according to the advantages and disadvantages of various modes.In terms of setting the excitation conditions,the assessment indicators of the equity incentive plan are single with strong subjectivity and operability.In the setting of he incentive target and price,Gree made the senior management executives,middle-level cadres,the backbone of business and subsidiaries as target reasonably.But the incentive price was so low that the incentive targets reached the incentive condition easily.Based on the above analysis of four aspects,the implementation of Gree Electric Company's equity incentive plan is a success in the aspect of net profit,but in combination,it was not.At the end of this paper,some experience and enlightenments from the equity incentive plan case are summed up.First of all,companies should give full consideration to their own ownership structure and employee compensation system.Also they should take the job characteristics and the degree of difficulty that incentive targets achieve excitation conditions into account.Then they can reasonably determine the scale of incentives.Second,companies should choose the most appropriate mode according to the strengths and weaknesses of incentives and applicability in various ways and characteristics of the industry.They still need to determine their development stage and stock market quotes.When setting the excitation conditions,the company should implement the principle of matching income and risk,not only regarding the accounting performance as an indicator,but also examining the market performance equity incentive plan improves.Company need assess the extent of the efforts of staff from both quantitative and qualitative levels.Finally,to determine the incentive target and rates should also analyze the industry characteristics,company size and growth cycle.It can help set the price with acceptance that mobilizes enthusiasm of staff.
Keywords/Search Tags:Equity incentive, Incentive target, Incentive mode, Incentive scale, Incentive rates
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