Case Analysis Of Equity Incentive Of BY-HEALTH

The separation of modern enterprise's ownership and management rights has led to a principal-agent relationship between shareholders and managers,resulting in agency problems.As a governance mechanism,equity incentives can effectively mitigate the conflict of interests between the two by gradually aligning the goals of shareholders and managers.Compared with the traditional salary incentive system with the basic characteristics of “salary,bonus,and welfare”,equity incentives have established a firmer and more closely-developed strategic development relationship between the company and employees.At present,basic wages and annual bonuses have not been able to fully mobilize the enthusiasm of the company's senior management personnel,especially for long-term incentives that are difficult to achieve.Equity incentives,as a form of long-term incentive,are obtained by allowing managers or employees to obtain company equity.Or give them the right to enjoy the corresponding economic benefits,so that they can participate in corporate decisions,share profits,take risks as shareholders,and thus diligently responsible for the company's long-term development services.Equity incentives first appeared to solve the principal-agent problem.After decades of development,there was a mature theoretical basis and empirical studies by domestic and foreign scholars found that the company launched an equity incentive plan to solve the principal-agent issue from an early stage,and also developed an opportunity.The motive is the use of equity incentives to obtain benefits for themselves.The implementation of equity incentives in the Chinese market started relatively late with respect to foreign countries.With the introduction of the equity division reform and the increasingly perfect regulations concerning equity incentives,the implementation progress of equity incentives in China has increased significantly.However,the development time of equity incentives in our country is too short,and the impact of related systems and the legal environment has made many companies fail to achieve good results after the implementation of equity incentives.The development course of the healthy food industry has similarities with the development of the equity incentive system.All of them have grown up in the foreign market.China started from the 1980 s.Due to the imperfection of laws and regulations,negative news broke out in the development process.As more and more domestic and international healthy food brands join the direct selling industry and the sustained and rapid economic development of our country,the needs of the people are also increasing.In 2005,China released the Measures for the Registration of Healthy Foods,which greatly regulated the health food and the effectiveness of the media in publicizing healthy foods.The people are paying more attention to health care,so the healthy food industry must have a broad potential market.After comprehensive consideration,this article decides to select a leader in the healthy food manufacturing industry in China—BY-HEALTH for case studies,using principal-agent theory,stakeholder theory,and information asymmetry theory,using literature data methods,event research methods,and comparisons.Based on the review of the domestic and foreign research literature system,the analysis method selected BY-HEALTH as the case and studied the effects of equity incentives for listed companies.The research results showed that the motivations for BY-HEALTH's implementation of equity incentives are:(1)In order to comply with the needs of the social environment and market development;(2)mobilize the enthusiasm of employees,and(3)increase market competitiveness.Judging from the implementation results,despite the market's positive response to BY-HEALTH's stock incentives,BY-HEALTH's stock price was increased in the short term and the shareholder's wealth was increased,but the implementation of stock incentives did not significantly improve BY-HEALTH's profitability,growth capacity,operational capacity and solvency.Overall,BY-HEALTH's equity incentive has not been successful.The main reasons for the failure are:First,the equity incentive plan has both benefits and incentives,which affects the effectiveness of the incentive effect to a certain extent.Secondly,the setting of exercise quotas is too high to make the incentive plan unsuccessful.Third,the equity incentive implementation plan is not well-integrated with the status quo of enterprise development and does not consider the long-term development of the enterprise;Fourth,there is no incentive for senior executives and result in insufficient incentives.Through the case analysis of BY-HEALTH's equity incentives,this paper believes that:(1)companies should consider their long-term development when formulating equity incentive plans;(2)strengthen preparatory work and development before and after incentives.