Case Study On Equity Incentive Of Midea Group

As a long-term effective incentive mechanism,equity incentive has been more and more widely used in corporate governance.Because in this mode,the employee’s income is closely related to the enterprise’s performance,so it can effectively improve the enterprise’s operating performance.Midea has maintained its equity incentive plan for six years and combined a variety of incentives to complement each other.Managers can consider the collective interests and be more carefully and comprehensively when making decisions,and corporate performance has improved greatly.Through the summary of relevant literature at home and abroad,this paper explains the research status of equity incentive,and finds that the case study of equity incentive for domestic household appliances industry still needs to be supplemented.As the leading enterprise in home appliance industry,Midea has three main considerations to carry out equity incentive: in order to solve the principal-agent problem of the company,to absorb and retain the core staff,to unite the core management team and business backbone of the company,and to perfect the governance structure of the company.There are three types of equity incentives in Midea: a six-phase stock option incentive plan for senior management and business backbone from 2014 to 2019,and a three-year restricted incentive plan for top management and other managers from 2017 to 2019,as well as a five-phase global partner shareholding plan for the core management team and two-phase business partner shareholding plan.Through understanding the process and situation of the equity incentive of the research group,it is found that the incentive scheme of the group has several experiences for other enterprises in the same industry to learn from,first,the large number of incentives and the wide range of incentives;second,the various incentive methods,Midea use three incentives;and incentive indicators are closely related to corporate performance;finally,it also stipulates clear responsibility and obligations that if employees can not exercise their rights on time or when there are violations of the relevant measures.But through the research,we also found that there are some problems in the process of implementing incentive plan.The following three points are more prominent: the performance appraisal index set in the exercise condition is simple,the index setting is not flexible,the scientific and multi-dimensional evaluation system is not formed,which may lead to hidden risks;secondly,the performance appraisal index setting is loose,the enterprise executives and employees may lose the motivation to work hard,which deviates from the original intention of incentive plan and shows the benefit effect of equity incentive plan.Another point is that because research shows that period of validity and incentive effects are positively correlated,so that a short validity of an incentive plan may not achieve the ideal incentive effect.These experiences and shortcomings of Midea Group have referential significance for other appliance enterprises.