A Study On The Inspiring Drawbacks Of Executive Stock Option (ESO)

As a important incentive mchanism,Executive Stock Option(hereinafter short for ESO) has got a wide and successful application in the west countries.In recent years,this system has been introduced by some of our enterprises.They hope that this system can successfully solve our enterprises problem of inspiring managers, which has not solved in the past over 20 years reformation .A distinctive feature of modern enterprise is the seperation of the ownership and the managership. Therefore,the problem that the rights of surplus-claiming and surplus-controlling don t match the capital ownership comes into being. In order to solve this problem,the enterprise circles and the theory circles are exploring and practicing incessantly.Undoubtedly,ESO is a excellent system innovation to solve this problem.ESO is a right afforded by the owner of the enterprise to the managers to purchase the enterprise s stock.lt solve the contradiction in some degree that the rights of surplus-claiming and surplus-controlling don t match the capital ownership.therefore it makes the benefit between managers and stockholders accord inherently as much as possible.However,owing to the unsoundness of our market economic system,putting ESO in practice at present time will suffer from many drawbacks.which lie at the aspects of law and regulation market system corporation harness,even at the aspect of people s idea and consciousness.How to overcome and solve those drawbacks effectively is a key problem whether ESO will bring practical effect or not in China.Therefore, the research in this paper will has extreme importance of realistic meaning and far-reaching strategic meaning for theory circles to probe ESO system,for enterprise circles to put ESO in practice and for governments to limit and restrict ESO system.The paper uses the way of practical and standard analysis.In writing of this paper,the author begins with the summary and uses the clue of drawbacks from which ESO suffer in China,then analyses how to overcome and solve these drawbacks and designs a suitable ESO project as: this paper s research result.Firstly,the paper introduces ESO,which is a incentive mechanism with greatly innovative meaning in theory and practice,and indicates that this system which has been applied widely and successfully in abroad can also be introduced into our enterprises.Secondly,the paper reviews the history of our mechanism of inspiring managers ,and thinks that the mechanism of inspiring managers has the problem of severely lacking of inspiration ,however in the past or at present time,and points out that ESO is a good system arrangement and the inevitable choice for our enterprises.Thirdly,the paper detailedly introduces the effect of ESO system and uses the way of practical analysis, and expatiates the profound theory foundation of ESOsystem and the extremely incentive effect in reality.Then,basing on above discussion of ESO,the paper lays emphasis on the drawbacks that ESO system suffer from in China.In these drawbacks,there are law and regulation, market system, corporation harness.even the people sidea and consciousness.Only do we try our best to overcome and solve these problems,ESO system can put in practice successfully.Finally,the paper brings forward countermeasures in detail and purposefully how to overcome and solve these drawback.Then the author points out that although ESO system suffer from many drawbacks in China,even the development and consummation of ESO system can t be completed in a short time, with the soundness of our legislation and policy,and with the maturity of our capital market,and with the deeply proceeding of our corporate harness structure,together with our continual cognition of ESO system ,thereby designing the ESO system scientificly and rationally ,the author think that ESO system will bring far-reaching impact on our corporate harness, enterprise reform and inspiring managers in a long time.