The Motivation And Effect Analysis Of Hengrui Pharmaceutical Equity Incentive

Companies often regard equity incentive as an incentive mechanism to retain core talents.It means that when the motivated person meets certain conditions,the company gives them a part of the equity as an incentive to participate in the company's business decision-making,as well as to share the company's profits,so that the interests of shareholders and managers can reach agreement.This incentive mechanism is considered to be one of the effective ways to solve the agency problem arising from the fact that the management right and ownership belong to shareholders and managers respectively.More and more enterprises begin to pay attention to R&D innovation.When R&D personnel and core technicians are encouraged to own the company's equity,they will be encouraged to safeguard the company's interests and pay more attention to the long-term value of the company.In the 1950 s,Fizel Corporation of the United States took the lead in proposing a mixed equity incentive plan to solve the problem of high income tax for company executives.In the late 1960 s,Japan also launched different forms of equity incentive schemes.European countries began to learn from the experience of these two countries,and equity incentives set off an international wave.In 1984,China first allotted shares to internal employees.Until 2006,before the promulgation of the "Trial Method of Equity Incentive for State-owned Listed Companies(Domestic)and other documents,all kinds of employee stock ownership plans launched during this period did not achieve good results.The equity incentive system was not established in China until the relevant documents were gradually formally promulgated.Pharmaceutical industry is an industry closely related to people's lives.The increasing attention has made its development the focus of attention of the whole society.Its development is faced with challenges and risks from home and abroad: the rapid development of globalization,the domestic pharmaceutical industry striving for foreign markets,export trade has more stringent control over the quality and effect of drugs,which also puts forward higher requirements for the R&D of enterprises;similarly,there are more foreign enterprises in expanding domestic markets,coupled with the implementation of policies such as domestic health reform,industries.Internal competition has become more intense.Pharmaceutical industry has the characteristics of high investment,high risk,high profitability and long R&D cycle.Its high profitability must also be based on providing better medical services.Only by developing better products at the lowest cost can it seize the market.Its development and technological innovation are closely linked,and human capital plays a very important role.The implementation of equity incentive in pharmaceutical industry is an effective means to retain technicians and attract high-end knowledge talents.It is also a powerful incentive on the way of innovation,which meets the overall needs of the industry.Hengrui Pharmaceutical has been implementing equity incentive system in recent years,relying on scientific research and innovation to promote effective new drugs to occupy the market,and has become a leader in the pharmaceutical industry.The operation of the company is dynamic,and the actual situation of different companies varies greatly.Selecting the core companies in the pharmaceutical industry for case analysis can provide reference experience for other companies in the same industry.Hengrui Pharmaceutical Company is taken as the object of this case study.Through analysis,several main motivations for its implementation of equity incentive are summarized as follows:(1)motivation for scientific research personnel to innovate;(2)attracting talents,stabilizing employees and maintaining the company's good long-term development;(3)realizing long-term incentives while alleviating the pressure on cash flow.It compares the financial performance of Hengrui Pharmaceutical Co.,Ltd.in horizontal and vertical direction with the financial performance of the same industry after the implementation of equity incentive.It shows that Hengrui Pharmaceutical Co.,Ltd.has developed well in financial performance indicators.After analyzing the company's R&D gains and the changes of employees' quality,it is also concluded that equity incentives have a positive impact on the company.From the financial indicators,stock prices,R&D harvest and other aspects of reflection,all show that equity incentives to Hengrui Pharmaceutical effect is positive.Generally speaking,Hengrui Pharmaceutical Equity Incentive has achieved success.The main reasons for its success are summarized as follows: first,its Equity Incentive Plan is implemented continuously and has a whole continuity;secondly,when it launches a new plan,it always draws on the strengths and weaknesses of previous plans and constantly improves them;thirdly,it chooses reasonable incentive targets and achieves good excitation.Encouraging effect.The structure of the article is divided into five parts.The first part is the introduction,introducing the research background and significance of the core element of the article,"equity incentive".The second part is the theoretical overview of equity incentive,introduces the relevant concepts and different ways of implementation of incentives,and elaborates the implementation motivation and theoretical basis of equity incentive.The third part is the case analysis of Hengrui Pharmaceutical Equity Incentive.It mainly introduces the basic situation of the company and the industry.It makes a concrete analysis of the equity incentive schemes implemented three times before and after,and compares and analyses the characteristics and influencing factors of the schemes.The fourth part is the case analysis part,which analyses the motivation and effect of Hengrui Medical Equity Incentive,mainly from the financial and non-financial effects.The fifth part is the conclusion and Enlightenment of the case.This paper uses literature research,case analysis,financial analysis and comparative analysis to analyze the motivation and performance of equity incentive of Hengrui Pharmaceutical.It concludes that equity incentive can effectively improve the financial performance of enterprises,enhance core competitiveness and strive for scientific research talents.This paper summarizes its relevant experience,which can be used for reference by other enterprises in the industry,and also for reference by other industries.