On Tunneling Of Major Shareholders Based On Performance Compensation Commitment

As the private placement and merger becomes more and more common,the conflicts of interest between minority shareholders and major shareholders are more obvious.At the same time,the performance compensation commitments have become more extensive and market-oriented,resulting in high commitment,high valuations and high stock prices in mergers.After the merger,the phenomenon that performance promises cannot be completed,or the major shareholders change performance commitments to evade their responsibilities,becomes more frequent.Whether the performance compensation commitment system can achieve the original intention of protecting the interests of minority shareholders or not is for further study.In order to explore the relationship between performance compensation commitment and tunneling of major shareholders,this paper analyzes the tunneling theory of major shareholders and summarizes the performance compensation commitments' effect on the incentive effect,signal effect and synergy effect of both parties in mergers.Combining the current M & A market,this paper sums up four performance commitment models and analyzes the effects,and then derives the mechanism of the performance compensation commitment and the tunneling of major shareholders,helping minority shareholders to identify the motives of major shareholders,prevent and supervise tunneling of major shareholders in the whole process of M & A.This paper takes case analysis as the research method,selects the Gong Da High-Tech acquiring Opzoon,and takes the original shareholders of Opzoon as the research topic of minority shareholders creatively.From the perspective of the interests protection of minority shareholders in the whole process of M & A,the paper carries out the research on tunneling of major shareholders based on performance compensation commitments.This paper analyzes the background of the M & A,the relevant institutional arrangements,the achievement of performance commitments,and the specific paths for major shareholders to implement tunneling under the performance commitment guarantee.Then,this paper discusses the effect on minority shareholders because of tunneling from the financial performance and the stock price.Finally,this paper introduces the process of minority shareholders coalition trying to fight against major shareholders and remove the board of directors,but failing to defend their rights.This paper finds that although Opzoon has been affected by the incentive effect and overfulfilled its performance commitments,the major shareholders,with the support of this system,have even more unscrupulously implemented the tunneling behavior of related guarantees and capital occupation,but the minority shareholders have not effective ways to protect their own interests.Through the analysis of the case,this paper summarizes three problems in the process of the M & A.Then,from the perspectives of both the condition of implementation of the tunneling of major shareholders and the reasons for the failure of minority shareholders to defend their rights,this paper further analyzes the case and sums up four factors from the M & A system,the external environment,the company and the minority shareholders themselves.Therefore,it puts forward six suggestions that can be considered in the protection of minority shareholders' interests in performance compensation commitments:perfecting performance commitments;improving external supervision;optimizing director structure;refining articles of association;identifying long-term motivation of major shareholders;establishing minority shareholders association.Based on the previous theories and case studies,this paper draws the following conclusions: for mergers with perfomance commitments,its motivation can be changed,reflected short-term support and long-term tunneling;when there is a performance commitment for profit protection,absolute control over the board of directors,and a high degree of separation between the two powers,it will increase the ability and motivation of major shareholders to tunnel;the consequences will be directly reflected in the continuous decline of the stock prices of listed companies,and will affect the overall business performance of the target companies and listed companies,ultimately leading to the interests lost of minority shareholders;and due to the vulnerability of the minority shareholders alliance,the imperfection of both internal governance and external legal system,it is difficult to restrict the encroachment of the interests of the minority shareholders by the major shareholders.