Research On The Problems Of Hongtao Stock's Restricted Stock Incentive

The imperfection of external market environment and unsound internal operation mechanism in China led to the slow development of equity incentive from theory to practice.Until the split share structure reform began to advance in depth with the promulgation and implementation of new ‘Company Law' and ‘Securities Law',the institutional barriers were lifted,and incentive mechanism could also be implemented in a better legal environment.Although in recent years,the implementation of equity incentive in listed company was increasing.There were not a few cases ending in failure.The most important reason for the failure of firms' equity incentive was the lack of scientific design,which directly led to the abortion of the program and even became the interest of tools of the management layer.Our country is continuously promoting the economic system reform and improving the modern enterprise system under the background that equity incentive has become an important way for enterprises to encourage executives.This system plays an important role in reducing the agency cost to the management,attracting the high quality human capital and inspiring the backbone of the enterprise.The success or failure is related to the construction of the executive incentive and restraint mechanism,the improvement of the salary system and the long-term development of the enterprise.Therefore,the design of enforceable and effectual equity incentive program for enterprises is very urgent.In 2010,Hongtao Stock launched the incentive draft for the first time,and in 2013 launched the second draft consecutively.Now,it has successfully entered the exercising period.The company's performance has also improved to some extent,and the demission rate was effectively controlled.The success of its incentive plan is related to the design of the program.The discussion of its incentive program design problem has certain significance to the other enterprises that plan to implement restricted stock incentive.This paper firstly elaborates the research background and significance,then reviews the related research of international and domestic scholars on the equity incentive effect and equity incentive program design.It introduces the relevant concepts and theories of restricted stock.Next,this article gives a brief analysis of the results of implementation of Hongtao Stock's incentive program.Taking the result as a guidance,the article delves deeper into the design of the following six elements.They are the incentive mode and the stock source,the granted object and the quantity of restricted stock,as well as the vesting price and the exercise conditions.In the aspect of the incentive mode and the stock source,this paper analyzes the applicability of restricted stock incentive to corporate governance environment,weighs the advantages and disadvantages of restrictive stock incentive mode and other modes and expounds the supplementary effect of private placement on cash flow.The result shows that the restrictive stock mode is more adaptable to the internal governance environment of Hongtao Stock,and it is more practicable.It is also Hongtao Stock's internal demand to optimize the ownership structure.In this mode,private placement of new shares increases the cash flow of enterprises.In the aspect of the granted objects and the quantity of restricted stock,the thesis studies the effect of including business personnel and technical staff into the plan,expanding the range of authorized objects,reducing the vesting percentage have on corporation innovation,distribution of benefits and internal governance.The result shows that including business personnel and technical staff into the plan positively influences on the creation.And the expansion of range of authorized objects guarantees the equilibrium distribution of benefits.Besides,Reducing the vesting proportion is conducive to the internal management of enterprises.In the vesting price and exercise conditions,through the analysis of the vesting price,lock-up period and exercise period,and the assessment standard and the share buy-back system of Hongtao Stock,this paper draws the conclusion that obtaining reasonable vesting price can relieve financial pressure on staff.And strictly limiting lock-up period and exercise period can strengthen the binding force to staff.At the same time,setting assessment standards and share buy-back system can enhance motivation.Finally,this paper summarizes the experience of Hongtao Stock's implementation of restricted stock incentive through the discussion of six key elements.They are the incentive mode and the stock source,the granted objects and the quantity of restricted stock,the price and the exercise conditions.Also,it still put forward the matters Hongtao Stock should pay attention to.Choosing the applicable incentive mode,determining the reasonable incentive objects and setting the scientific exercise conditions are important experience to realize the incentive effect and the constraint effect of restrictive stock incentive to avoid the weakening of related effects and promote the sustainable development of enterprise.Meanwhile,Hongtao Stock should also perfect the internal control to strengthen the supervision to the implementation of restrictive stock incentive,especially the information disclosure of Remuneration and Appraisal Committee and the supervision from Independent Director and Board of Supervisors.It should also clear the responsibility of internal institutions.