After the restart of IPO in 2014, many listed companies have successively launched equity incentive plans.
On the contrary, in 2013, some listed companies had to terminate their equity incentive plans due to unsatisfactory performance at the end of the year due to fierce market competition. Among them, Moso Power said it would terminate its equity incentives in 2013 because its performance growth could not meet expectations.
Chinese-style equity incentives: Not everyone who sees it gets a share
It is understood that Moso Power decided to terminate the restricted stock incentive plan because its operating performance growth did not meet expectations. According to the equity incentive plan previously launched by Mosuo Power, the condition for unlocking the first phase of the company's equity incentive is that the net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses in 2013 is 63.92 million yuan. However, according to the company's third quarter report, the company achieved a net profit of 23.76 million yuan after deducting non-recurring gains and losses in the first three quarters. In other words, Maoshuo must achieve a net profit of more than 40 million yuan after deducting non-recurring gains and losses in the fourth quarter to meet the equity incentive unlocking conditions, but it is too difficult to achieve the target requirements. Therefore, Mosuo fully negotiated and communicated with the incentive recipients and the company's management. In order to ensure the effectiveness of the incentive plan and comprehensively consider the cost burden of employees' capital contributions, it submitted the matter to the board of directors for consideration to terminate the implementation of the equity incentive plan, repurchase and cancel restricted stocks.
Equity incentive objects are divided into levels
Maoshuo is not the only one to terminate the equity incentive plan halfway. Many pharmaceutical companies announced their plans to implement equity incentive plans at the beginning. In fact, the goal is nothing more than to maximize benefits and use the model of community of interests to stimulate the enthusiasm and responsibility of management and employees. However, the implementation of this plan is limited by various realistic conditions and factors.
Then, when implementing an equity incentive plan, are there strict requirements on enterprise size, talent, and industrial chain to allow the plan to be implemented? According to the reporter’s interview, equity incentive plans have no distinction in terms of enterprise size requirements, including listed enterprises, state-owned enterprises, private enterprises, etc. Han Xingcheng, general manager of Suzhou Juyuan Microelectronics Co., Ltd., believes that small and medium-sized enterprises can also implement equity incentives, and this method can even be tried at the beginning of the establishment of the enterprise. He believes that equity incentives are a good thing for management or employees, and are also a community of interests for them. The purpose is to improve employees' enthusiasm and retain talents. Equity incentive plans are a good way for the company to develop longer-term.
Han Xingcheng also said that some companies have standards for implementing equity incentive plans. For example, when some companies choose equity incentive targets, they will require the company's management or technical personnel, and employees are not included. Just like for production-oriented companies, the implementation of equity incentives has a greater effect on management or some technical personnel, but has little effect on ordinary employees. The salary of ordinary production workers is calculated on a piece basis and is distributed according to work. It can be seen that equity incentive plans also need to be graded. In addition, he also believes that the implementation of equity incentives has little to do with the industrial chain.
Equity incentive ≠ compensation system
It is understood that companies will encounter four problems when implementing equity incentive plans, especially among small and medium-sized enterprises. 1. Enterprise instability and insufficient equity liquidity lead to insufficient stock option incentives. 2. Competition in the industry is fierce, small and medium-sized enterprises have a short life span and are in a stage of rapid growth. The organizational form and business scope of the enterprise may undergo huge changes. Mergers, spin-offs, investment diversions, etc. often cause enterprise suspension. Since enterprises are usually small in scale, have concentrated control rights, and are more casual in business decisions, this will inevitably lead to large changes in corporate policies and poor sustainability. Management talents are highly mobile, which also causes discontinuity in business decisions. This makes it difficult to evaluate employee performance, and it is difficult to measure the degree of stock option incentives implemented. 3. The incentives of the share option system are realized through the price difference between the exercise price and the transfer price. Since most small and medium-sized enterprises are unlisted companies, there is no market price as a reference when setting the exercise price, and it is difficult to determine the exercise price of the stock option. In addition, some small and medium-sized enterprises have not established standardized basic management and scientific performance evaluation systems in the actual management process, and cannot correctly measure the performance of employees. They lack the basis for equity incentives when implementing incentive equity;4. Treat equity incentives as benefiting employees and use equity incentives blindly in order to retain talents. Many small and medium-sized enterprise owners have misunderstandings about the purpose of implementing equity incentives, which brings great obstacles to the implementation of equity incentives. Equity incentives are long-term incentives and have the characteristics of uncertainty in returns for the recipients. Improper use will not only fail to motivate, but will be counterproductive.
Wang Junqiang, a well-known domestic equity incentive expert, pointed out that the success of the equity incentive plan design does not depend on whether it is legal and compliant or the words are carefully chosen. The key lies in whether the equity incentive can help the company to open up the meridians of corporate strategy, corporate governance, capital operation, salary system, performance appraisal, corporate culture and other modules, and then become a set of management and control philosophy for the boss to manage the company, realizing the perfect connection between vision and execution, organizational rules and personal interests. Otherwise, the equity incentive plan will inevitably be reduced to a compensation system at the human resources level.
However, among the LED companies that implement equity incentive plans, most currently only stay at the level of employee benefits, and have not yet gone further to the strategic step.
my country's equity incentive plan has a long way to go
"If the equity incentive plan is not implemented well, it will become illegal fundraising." Han Xingcheng believes that based on the development of the domestic market economy, equity incentives are still difficult to implement, and equity incentive plans have been well developed in some foreign developed countries, but there are still many problems at home. For example, since there is no domestic law on equity incentives, nor does it stipulate specific conditions for equity incentives, there is a possibility of abuse. However, equity incentives in some listed companies are "disguised", and "red envelopes" are distributed to senior executives with equity incentive plans in disguise. In this regard, some people believe that the equity incentive plan of listed companies must honestly disclose performance information to investors, set reasonable performance growth targets, and comply with laws and regulations.
The biggest difference between equity incentive plans for state-owned enterprises and non-state-owned enterprises is that due to the ultimate ownership of state-owned enterprisesPeople are absolutely dispersed, so in the process of business operation, we must reduce the level of agents as much as possible, improve the transparency of the enterprise, and achieve normal operation of the enterprise under public supervision.
Stock option awards link the business performance of the company to the operator's income, which can encourage business operators to do their jobs well and improve corporate efficiency to a certain extent. However, because my country's state-owned listed companies bear many major social responsibilities, their operations are affected by the adjustment of the national industrial structure and changes in social development goals. They cannot pursue profits as their main goal like enterprises in Western market economies. Therefore, in the process of implementing stock option awards, it is likely to lead to high cost of benefit evaluation, and the equity incentive mechanism may be deformed as a result.
Just like the stock option incentive mechanism that is effective in Western countries, alienation will inevitably occur in China's state-owned enterprises and produce various side effects. For example, the relevant government departments have tried to remedy the situation and formulated specific rules to avoid harming the interests of investors. However, because they have not fundamentally resolved the contradiction between the dispersion of ownership and the highly concentrated management of corporate resources,Therefore, it is impossible to fundamentally overcome the problems caused by the stock option incentive mechanism.
At present, my country's capital market is still in the early stages of development, the capital market is not yet mature, and insider control problems are serious. To implement equity incentive measures in my country, we must not only improve the performance appraisal system, strictly enforce equity incentive targets, improve incentive granting methods, and reasonably control the level of incentive income, but also establish social supervision and expert review mechanisms to ensure the fairness of equity incentives.
How inspiring are equity incentives?
Equity incentives suddenly come like a spring breeze
In August this year, Sanan Optoelectronics disclosed its employee stock ownership plan, Absen launched a stock incentive plan in September, and Unilumin Technology tried "fixed-increase" equity incentives... Faced with the slowdown in economic growth and the intensified differentiation of company performance, A-share listed companies have resorted to "equity incentives" this year to cope with the situation. Data shows that the scale of equity incentives in the first nine months of this year has exceeded that of the whole of 2013. After experiencing the collective failure of equity incentive plans in the past few years, corporate equity incentive plans are now experiencing a "spring breeze".What is equity incentive? What is the current situation and development trend of equity incentive?
Equity incentive: motivating employees and managers
It is understood that 52 companies in the Shanghai and Shenzhen stock exchanges announced equity incentive plans in 2012, with 706 million shares planned to be granted; while in 2011, only 17 companies announced equity incentive plans. Less than 150 million shares are planned to be granted. That is, the number of shares to be granted for equity incentives in 2012 increased by about 370% compared with that of 2011. Listed companies are more and more enthusiastic about launching equity incentives, and non-listed companies are also increasingly inclined to use equity incentives. Incentive means are used to retain core talents in the company, but the problem is that many people simply don’t understand what equity incentives are. In a broad sense, equity incentives are an art that allows employees to work autonomously and make the company sustainable. In a narrow sense, equity incentives are an incentive method that uses equity to give professional managers certain economic rights, allowing them to participate in corporate decision-making as shareholders, share corporate profits, and bear corporate risks, so as to serve the company’s long-term development diligently and responsibly. Relevant industry insiders said that equity incentives, as the name suggests, are rewards given to motivate employees and managers and encourage them to work together for the same goal. "Equity incentives are very necessary for non-listed companies. However, any enterprise's equity incentive plan requires prerequisites for implementation, and must go through specific professional processes before it can be successful." Cai Hong, a financial capital practical expert, said.
The total number of companies participating in equity incentives has gradually increased
Since 2010, A-share companies have implemented equity incentive plans on a large scale, and generally adopt lower-cost stock option incentive models. From the perspective of maximizing profits, listed companies prefer to launch equity incentive plans when the stock market cycle is low and the company's stock price is undervalued. Among them, private enterprises on the Small and Medium-sized Board and GEM have become the absolute main force in advocating equity incentives. At present, more and more listed companies in my country are using equity incentives for corporate management. Newland, a company listed on the Shenzhen Stock Exchange Main Board, issued an announcement on September 27, announcing that in accordance with the previously passed "Proposal on Matters Related to the Grant of the Company's Restricted Stock Incentive Plan", the board of directors agreed to grant10.27 million restricted shares were granted to 189 incentive targets.
In fact, New World is by no means the only listed company that has recently been involved in equity incentives. According to statistics from the data center, 125 companies such as Guangzhou Automobile Group and Hangxiao Steel Structure have implemented their own equity incentives since this year; 46 companies such as Hengshun Electric and Dongfang Fortune have released their own equity incentive plans; in addition, the equity incentives of 14 companies including Guihang Group and New Continent have either been approved by government regulatory authorities or approved by the company's shareholders' meeting this year, and are all progressing smoothly. In comparison, the total number of listed companies in the A-share market with records of participating in equity incentive matters in 2013 was only 142.
The economic downturn promotes the development of equity incentives
Industry insiders point out that since the equity incentives of listed companies directly link the company's core technology and management personnel's interests with the company's performance growth goals, the launch of equity incentives usually means that listed companies guarantee their future operating performance, which is beneficial to the long-term development of listed companies. Because of this, equity incentive concept stocks have recentlyIt has repeatedly performed well in rebounding markets.
At the same time, Zheng Lili, an investment consultant at GF Securities, analyzed that there are three reasons for the intensive introduction and implementation of equity incentives by listed companies this year: First, the domestic economic growth has slowed down this year, and interim report data show that the performance differentiation of A-share listed companies has intensified. Some listed companies hope to use equity incentives to show confidence in future operations and stabilize investor sentiment. Secondly, although the market has recovered since late July, the overall performance of the market this year has been relatively sluggish, and the valuations of most individual stocks are still low. The launch of equity incentive plans by listed companies can provide a positive stimulus to stock prices and leave ample room for arbitrage for future executive exercise of rights. Third, some listed companies hope to use the "golden handcuffs" of equity incentives to retain important technical and managerial personnel who intend to change jobs.
The equity incentives of Internet companies make people jealous
Recently, Jack Ma can always be found in the headlines of financial news. It has to be said that among companies that implement equity incentive policies, Alibaba is one of the companies that has been labeled successful. According to reports, after Alibaba went public,, tens of thousands of stock-holding employees share tens of billions of dollars in equity, and many of them became multi-millionaires overnight. On October 4, Alibaba Group also submitted an S-8 document to the U.S. Securities and Exchange Commission (SEC) to issue approximately 65.92 million additional shares under the equity incentive plan, with a total value of approximately US$5.06 billion. The equity incentives of Internet companies do make many people jealous.
Using equity benefits to create "golden handcuffs" to motivate employees is becoming increasingly popular among Internet companies. According to reports, following 360, Baidu, Tencent, Dangdang, and Alibaba, Suning Cloud Commerce has also accelerated the pace of employee stock ownership.
On October 9, Suning Cloud Business announced that it had completed the purchase of shares under the employee stock ownership plan at an average price of 8.63 yuan per share. The reporter learned that the biggest highlight of employee shareholding this time is that it breaks the previous restrictions on the number of years and methods of joining the company, and is open to all middle- and senior-level employees, including IT R&D personnel, Internet operations personnel, and front-line store managers; there are both airborne executives who have recently joined the company, as well as old employees. There are about 1,200 employees holding shares this time.
Some analysts said that Suning Cloud Business has set an example this time.In order to boost investors' confidence in the company's future, it also echoes the policy - the China Securities Regulatory Commission issued the "Guiding Opinions on the Implementation of Pilot Employee Stock Ownership Plans by Listed Companies" in June this year, requiring the implementation of pilot employee stock ownership plans in listed companies. China Securities Regulatory Commission spokesperson Zhang Xiaojun said that promoting the pilot of employee stock ownership plans in listed companies will help establish and improve the benefit-sharing mechanism between workers and owners, improve corporate governance, and enhance employee cohesion and company competitiveness.
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