Analysis On The Failure Of Shanghai Jahwa Equity Incentive Case

Equity incentive is an incentive for the high-end management personnel and technical staff in the enterprises,which can make these employees obtain a certain corporate equity,and operate management companies in the identity of the shareholders,sharing profits and risks.Equity incentive has effectively solved the problems caused by the agency problem,which has been confirmed in western developed countries and regions.China is the largest developing country,equity incentive is windingly developing and gradually improved.Generally speaking,the interests of the enterprise staff and the owner should not be exactly the same.The main business managers and key technical personnel for the enterprise become the shareholders of the enterprise because of implementing the equity incentive,the company's interests and their personal interests will gradually become the same,then form a corporate interests unit,so the contradiction between the two can be effectively weakened.After the company's major technology and management personnel successfully transforms into shareholders,they will be able to enjoy the bonus treatment.Equity incentive will greatly enhance the initiative,creativity and enthusiasm of the technical and management staff.This is because the business managers will be rewarded or punished for their own performance.Equity incentive is a long-term and long-effect incentive mechanism,not only the business managers can get appropriate reward during their presidency,but also may get some part of the reward outside the operation period.This requires operators to pay attention to the performance of his term of office;at the same time,they should pay more attention to the long-term benefit for the development of enterprises,so as to ensure the that part of income outside of his tenure,thereby further weaken the action that operators pursue short-term interests of the company,and even ensure the long-term interests of the company,improve the company's comprehensive competitive strength.From the above,we can see the study of equity incentive has a lot of practical value.Through the analysis of Jahwa equity incentive failures,this article will analyze reasons for this failure,and put forward suggestions for the reason,provide more practical experience for the state-owned enterprises stock incentive.At the same time,equity incentive has a very far-reaching significance in corporation governance,whose production and development all own a very deep theoretical foundation.These theories have provided a fertile soil and rich nutrient for the theory of equity incentive.First,these theories are put forward by economists in the process of corporation governance,which has its own economic background and social background,and its own uniqueness and universality.Second,these theories have given us the theoretical evidence and theoretical basis for the study of various theoretical and practical problems.As an important problem in the executive incentive mechanism system,we are continuing with the exploration of equity incentive.At present,there are a lot of research on the stock option incentive,but few have carried out in-depth research on the implementation of equity incentive in the state-owned enterprises;and the existing researches are all focused on those listing Corporation.At the same time,analysis on the failure of the implementation of equity incentive plan in state-owned enterprises are rare.Combining with this special and typical case of Shanghai Jahwa,through the reasons for failure of the implementation of equity incentive under the background of state-owned holding,from the theory of corporate governance,it analyzes the enterprise performance appraisal system theory,incentive theory and other aspects,which has a certain academic value to improve the existing theory.Therefore,this paper selects the old state-owned enterprises--Jahwa,do the comparison and analysis on the implementation of the first equity incentive in 2008 and the second implementation of equity incentive in 2012,and finds the 2008 equity incentive implementation in state holding listed companies Jahwa failed,did not achieve the expected results,and also brought a series of problems,such as assignment problem,moral issues,performance appraisal problems and so on.Through a series of research analysis,it is found the specific problems in Jahwa's implementation of equity incentive plan are: the sources of equity incentive stock were restricted,equity incentive design and implementation management were under the control of the managing hierarchy,the performance evaluation was not effective,incentive mechanism did not last long,and the incentive lacks effective supervision.These problems are caused by the imperfection of corporate governance structure and controlling right,the lack of effective manager market,unsound performance evaluation index system,weak effectiveness of capital market and imperfect stock incentive supervision.So in order to further optimize the equity incentive plan of Jahwa,this paper puts forward the following points of views and suggestions: first,the corporate governance structure of state-owned listed companies should be improved,the measures can be taken to perfect the subject of state ownership's management over state-owned holding listed companies,play well the role of independent directors,improve the internal governance mechanism,and optimize the ownership structure of enterprises.Second,adopt the performance appraisal system based on EVA.Third,build up the corresponding manager market,such as optimizing the current manager market in our country,perfecting the overall quality of professional managers in China,and improving the level of the development of the headhunting industry.Fourth,establish an effective capital market,build a multi-level capital market structure system,improve the information disclosure system,and also strengthen the supervision on the capital market.Finally,we should establish a good supervision mechanism of equity incentive,which can start from the supervision of the government,the supervision of social groups,and the supervision of management hierarchy.The innovation of this paper is that it deeply and detailedly analyzes the implementation of the state-owned holding listing corporation,and its shortcoming is that the research has not carried out the empirical test,and some data such as the long-term incentive effect needs further confirmation.