Research On The Motivation And Effect Of ESOP In Legend Holding

With the deepening of China's economic and social reform,China began to carry out the reform of mixed ownership in state-owned enterprises.Mixed ownership economy is of great significance to promote the improvement of the modern enterprise System,through integrating state-owned capital with public capital and to realize the basic economic system.Since the 18 th CPC National Congress,the new round of reform in state-owned enterprises has begun.The decision of the Central Committee of the Communist Party of China on deepening the reform in a number of major issues issued in the third Plenary Session of the 18 th CPC Central Committee in 2013,the Party pointed out the mixed ownership economy implementing employee stock ownership,which fully affirmed the ESOP can help solve the problem of the relationship between enterprise and staff.ESOP has become the essential part of enterprise reform in future,especially the reform of state-owned enterprises.State-owned Assets Supervision and Administration Commission issued the guidance listed companies implementing ESOP in June 2014,which pointed out listed companies gradually began to explore the ESOP.The development of mixed ownership not only helps to improve the property rights structure of our state-owned enterprises,enhances the competition for innovation and vitality,but also benefits from various forms of ownership Capital's complement each other at the present stage of our country.Exploring and implementing employee stock ownership is an important way to deepen the reform of state-owned enterprises,to improve the competitiveness and to realize diversification of equity.Therefore,it is of great research value for ESOP under the background of the mixed ownership reform of state-owned enterprises in our country.Based on the literature both at home and abroad,the mixed ownership economy is an economic framework that is suitable for both state-owned and non-state-owned business,which is also an important breakthrough for the reform of state-owned enterprises.Human capital theory,and two-factors economics theory both agree that ESOP can effectively enhance corporate cohesion,mobilize the enthusiasm and creativity of employees,and ease the agency problem.Legend Holdings as a state-owned high-tech enterprises earlier implemented the mixed ownership reform,and then human capital is the source of value creation.As we can be imagined,Legend is concerned about incentive in terms of the knowledgetalents.ESOP platform model used by the Legend Co.Ltd is different from most companies,which is worthy of our research on the differences,and gather experience for other state-owned enterprises implementing mixed ownership reform in future.We choose Legend Holdings as the research case to analyze the success and possible problems of the reform and limited partnership as an ESOP platform deeply.The main body of the paper is divided into three parts.The first part is the theoretical overview of ESOP under the background of mixed ownership;the second part introduces the implementation and motivation of ESOP of Legend Holdings.The implementation includes the process of changing from dividends to equity,introducing private capital to participate in employee stock ownership,and establishing a new limited partnership as a platform for employee stock ownership;The third part analyzes the effect of employee stock ownership plan,which is analyzed from two aspects: introducing private capital to participate in ESOP and introducing limited partnership as share holding platform.The introduction of private capital can help Legend Holdings listed,financing,optimize the structure of corporate governance and contribute to the implementation of diversified strategy of Legend;choosing limited partnership enterprise as ESOP platform Legend Holdings can reduce the agency cost,help listing from the policy,manage centrally and bring the tax discount.Based on the above analysis,we conclude that introducing Fanhai Group to participate in ESOP improves business deficit and promote diversified strategy.Choosing the limited partnership as the employee's shareholding platform can promote equity management and give senior executives more control with less money.However,Legend Holdings practices may also have a negative impact.Private capital to participate in employee stock ownership may lead to the loss of state-owned assets;In addition,when a limited partnership is a platform for employee stock ownership,it is difficult for employees to subscribe to shares only on the basis of bonuses and wages.We can consider to improve the supervisory system of state-owned assets in the process of qualification examination,private ownership and equity withdrawal in terms of the former.And in terms of the latter,giving a suitable pricing for technical results can be an effective because it can help encourage innovation and attract talents.