A Case Study On Compound Equity Incentive Of LANXUM

With the improvement of relevant policies and regulations on equity incentives in China,more and more listed companies choose equity incentive mechanisms to improve their incentive systems.The key to the effectiveness of equity incentives lies in the rationality of the design of equity incentive contract structure,and the equity incentive model is the core element of the equity incentive contract structure design.Nowadays,the demand for equity incentive models of listed companies is becoming more diversified,and the single equity incentive model can no longer meet the needs of various types of local market companies.Therefore,the equity incentive model is constantly innovating in practice,and there is a new model of compound equity incentives are derived.The compound equity incentive model can combine the advantages of various single equity incentive instruments and provide a larger choice for listed companies to design equity incentive contract structures.In June 2016,LANXUM announced and implemented a compound equity incentive plan,which uses incentives for stock options and restricted stocks to balance the role of stock options and restricted stocks.However,after the first phase of exercise and unlocking,the composite equity incentive plan was announced in June 2018.This paper firstly sorts out the related literatures and theories of equity incentive definition,equity incentive model and equity incentive effect at home and abroad,and takes LANXUM's compound equity incentive scheme as the research object,and evaluates the composite from equity incentive scheme design and business performance analysis.The effect of equity incentives.Based on the industry background and motivation analysis of LANXUM's implementation of equity incentives,combined with the business development direction of LANXUM,the rationality of the composite equity incentive contract structure design was evaluated,and the reasons for the failure of the compound equity incentive plan were summarized.This paper has the following enlightenment through case analysis:(1)the design of LANXUM's compound equity incentive contract structure is reasonable and worthy of reference for listed companies.The combination of incentive models can balance the advantages and disadvantages of stock options and restricted stocks.The effectiveness of equity incentives(2)a single performance assessment indicator is likely to cause management to manipulate profits and increase investment risk preferences,and multiple exercise assessment indicators are more effective.(3)The timing of the appropriate equity incentive plan should be selected in conjunction with the market conditions and the company's own development direction.(4)Optimizing incentive targets can enhance the enthusiasm of ordinary employees and promote the development of the company.(5)Fully consider the company's current situation and financial data to formulate reasonable equity.Incentives of exercise conditions.Through the research on the structure design and incentive effect of LANXUM's compound equity incentive contract,it is expected that the listed companies that intend to implement the equity incentive mechanism in China will play a role in the choice of compound equity incentive model and the corresponding equity incentive contract structure design.Drawing on the role,it can also provide a reference for the evaluation of equity incentive effects by stakeholders of listed companies.