The Theory And Practice Of Executive Incentives In State-owned Investment Corporations

One of the main characteristics of modern corporate system is the separation of ownership and management right,thus forming a principal-agent relationship.Executives,as the company's core managerial force,master the company's operating right.However,the utility functions of corporate executives and corporate owners tend to be inconsistent,and executives may damage the interests of owners and the companies in the pursuit of self-interest.Therefore,it is imperative for all companies to reduce the agency costs while attracting and retaining core managers.In order to reach this goal,appropriate incentive mechanism is essential.When talking about the relevant issues of state-owned enterprises,people often criticize that,under the state-owned enterprise system,the blurring subject of ownership directly leads to the absence of the subject of responsibility.For state-owned investment companies,it is necessary to change this situation from the system and mechanism,and construct a relatively clear responsibility body.Of course,letting the state-owned investment company truly be the subject of responsibility for state-owned capital investment and operation,it is supposed to respect the operational autonomy of the state-owned investment company first,so that the operating performance can be strengthened by the rigid constraints of market competition.At present,from the aspect of management,although the state-owned investment companies have applied the enterprise management system,the administrative management is still quite common and the separation of government and enterprise is far from being put into place.In particular,the problem of imperfect incentive system severely has restricted the investment efficiency and vitality of state-owned investment enterprises and adversely affected the development of the entire investment industry.Therefore,exploring a suitable incentive mechanism for state-owned investment companies has become increasingly important-which is also the main research issue of this article.Based on the natural characteristics of the state-owned company,this paper takes HY Investment Company as the research object and makes comprehensive use of research methods such as Staff interviews,case studies and data simulations to propose a solution to the incentive mechanism for this company.By introducing the background,the organization structure,the business development strategy,the present situation of core staff incentive and the incentive effect of this company,we have pointed out three problems existing in HY's executives incentive mechanism:policy,system and mechanism.Then,we have proposed three alternative incentive programs,namely the project manager responsibility system plan,the equity incentive plan and the following investment incentive plan.Based on the comparative analysis of the feasibility of these three incentive programs,the internal communication with HY insiders and the case study of some investment projects participated by this company,the impact of the following investment incentive and the calculation of investment return distributions have been simulated.Finally,we have proposed an incentive scheme--the following investment incentive plan for HY Investment Company.The main contributions of this paper are as follows.Firstly,we have proposed an incentive plan based on following investment incentive to solve the problem of lacking of motivation of core management staff of company,which is helpful to enhance the company's performance and competitiveness,attract and retain professional talents.Secondly,through the combination of questionnaire,interviews and scientific theories,we have explored an incentive path that contributes to motivate core managers of HY,which has implications for other state-owned investment companies in the same industry.