The Design And Effect Of ESOP By Using Incentive Fund

In 2014,China Securities Regulatory Commission issued the “Guiding Opinions on the Pilot Implementation of Employee Shareholding Plan for Listed Companies”.Under the background of the reform of state-owned enterprise mixed ownership,the employee stock ownership plan has returned to the historical stage.The state-owned enterprises have been highly cautious in designing and implementing employee stock ownership plans.However,Other non-state-owned listed companies have strong autonomy.With the flexibility of guidance,they have implemented a variety of employee stock ownership plans.However,the shareholding plans aren’t satisfied,and they have become a common phenomenon that the stock breaks and the liquidation breaks out.Under the unreasonable design of the program,the employee stock ownership plan gradually deviated from the problem of mitigating agency and improving the original intention of corporate governance.The chaos of ESOP makes people wonder the motivation for the company to launch an ESOP and what kind of design ESOP meets the expectations of governance effects,which in turn can motivate employees’ rational behavior and improve company performance?Based on principal agent theory,shared economics theory,dual economics theory,democratic company theory,and stock ownership of human capital theory,this paper summarizes the governance effect expectation of ESOP,the realization path of governance effect is the behavioral efficiency of the object,also combines the development history of China’s employee stock ownership plan,summarizes the characteristics of typical employee stock ownership plans in various countries,and carry out the descriptive statistics on stock sources,funding sources,lock-up period,duration,profit and loss of China’s current shareholding plan,sums up the problems that the shareholding period is too short,the employees’ risk-taking response isn’t positive,the executives’ self-interest is obvious,and there is no threshold to practice the free-riding behavior.Hengtong Optic-Electric,which uses the reward fund as the sole source of funds for the shareholding plan,is selected as a research case.The design characteristics of the two-phase employee shareholding plan of Hengtong are analyzed.It is found that the design benefit of the first-phase shareholding plan is obvious,the long-term incentive mechanism has realized the expectation of the governance effect of the second-phase shareholding plan.After further analyzing the motives of the two-phase shareholding plan,it is found that the first-phase shareholding plan is under the dominant shareholding motive,the incentives of some employees before leaving the company,and the stockholder arbitrage motives of the shareholding executives,these irrational motivations deviated the first plan governance effect is expected.The scheme design of the second-phase shareholding plan has achieved triple incentives for employees through the award fund.The employee stock ownership plan has become the second largest shareholder of Hengtong Optic-Electric.The agency cost is reduced,the agency efficiency is improved,and the governance effect is expected.Through the analysis of the governance effect path,during the evaluation period of the second-phase employee stock ownership plan of Hengtong Optic-Electric,the management decision-making behavior is rationally expressed as efficiency investment,and the marketing personnel’s sales behavior is rationally developed to open up domestic and foreign markets,identify high-quality customers,and innovate technical backbone personnel.Behavioral rationality is characterized by high levels of innovation output,and thus the expectations of the governance effect of the shareholding plan.Therefore,the research in this paper believes that:(1)Relative to the strict regulations of laws and regulations on the design of equity incentive schemes for listed companies,executives have the self-interested motives for designing related schemes by using the ESOP flexibility and welfare,thereby realizing the transfer of interests and distorting governance effect expectations.(2)Incentive fund model ESOP mitigates the practice dilemma of the market shareholding plan through threshold design,cyclic incentives,and enterprise value sharing,realizes the establishment of long-term incentive mechanism,constrains management’s nonefficiency investment behavior,and improves non-management behavioral efficiency,stimulates the sense of “ownership” of employees,thereby improves the company’s performance and realizes the expectations of the governance effect of the shareholding plan.The contribution of this paper is to analyze the implementation effect of the employee stock ownership plan by constructing the effect analysis path of the employee stock ownership plan.The employee stock ownership plan of the reward fund model can realize the original intention of the employee stock ownership plan to improve corporate governance.The design is worthy of reference for listed companies.The shortcoming of this paper is that due to the limitation of the time limit,this paper can only analyze the implementation effect of the case company shareholding plan in the three-year evaluation period,and the effect of the followup period employee stock ownership plan needs further observation..At the same time,the research conclusions have certain reference functions for other companies to implement the employee stock ownership plan,but the industry environment and their own development situation faced by different enterprises are different,and the conclusion is not highly universal.