Reasons And Countermeasures For The Explosion Of Employee Stock Ownership Plan

Under the guidance of policies and the promotion of the market,the employee stock ownership plan in China has developed rapidly and is in a hot spot.However,in the context of new management regulations and tightening financing,the highly leveraged employee stock ownership profit model has become unsustainable,and the employee stock ownership plan has ceased to be normal.Especially like the fall of the stock index in the first half of2018,the employee stock ownership plan has appeared a new phenomenon of "bursting" one after another.At the present time when the employee stock ownership plan has successively lost or even burst,it is necessary to further study the problems arising from the employee stock ownership plan and find out the corresponding solutions to meet the needs of market development.This paper uses case analysis and event study to analyze the causes and consequences of the bursting of Kaidi Eco-ESOP,points out the problems in the implementation of ESOP,summarizes the experience and lessons learned,and puts forward corresponding constructions on how to protect employees' rights and interests and improve ESOP from the perspectives of investors,employees,enterprises and government policies.Discussion.This paper draws the following conclusions:(1)There are three motivations for Kaidi to launch ESOP: financing demand,retaining outstanding talents and improving governance effect.The motivation of employee stock ownership is affected by both operating performance and stock price;(2)the consequences of employee stock ownership plan are manifested in three aspects: poor market reaction,poor retention of technical personnel and financial performance;(3)the reasons for stock bursting are internal and external: the policy of de-leveraging,the general market float and loss,the deficiencies of employee stock ownership plan system;strategic expansion,borrowing foreign debt,failure of internal control and incompatibility.Reasonable occupancy of funds,coupled with the inappropriate choice of employee stock ownership plan,eventually led to the bursting of employee stock ownership plan.(4)For the above reasons,the countermeasures are as follows: risk education and rational investment for investors and employees;appointment of professional staff representatives,information sharing.For enterprises,they should choose the right type of employee stock ownership and timing of issuance according to the internal and external environment and their own characteristics;establish a scientific and reasonable pricing mechanism with the help of professional institutions;formulate long-term strategy,and treatinterest-bearing liabilities and capital chain prudently.From the government's point of view,one is to raise the threshold of issuing employee stock ownership;the other is to control leverage risk and reduce tax burden;the third is to increase the SFC's channels of answering questions and reporting,so as to prevent all aspects in advance,in the process and after the event.