Based On The Principal-agent Theory Of The Executive Stock Option

Principal-Agent theory proposed in 60's last century as an economic theory has become the core theory of human resources management gradually. With the acceleration of economic globalization and international company prevailing, executive stock option, as an effectively executive choice, has already played an important role in the economic development. However, the information's asymmetric nature and the uncertainty of the results in principal-agent theory, and the complication of the theory itself, made the research superficial. It is so hard to apply the research achievements in the practical work that few people can work it out.For this consideration, this essay established a class of stock options related principal agent model seeking for the most effectively executive contract design that can be applied in the practical work. An innovative and exploratory research about the design of the model and application method is discussed in this essay. The brief content of this essay is as followed:1 Introduced the beginning, development, and the current research of the principal-agent theory, and the general debate framework of principal-agent model, the basic theory of this essay.2 Explained the stock-option-related nouns, history, and basic theory, especially the most common option pricing methods.3 This study, basing on the time value of money ,discusses a designing of the principal-agent contract of a class of insurance industry ,introducing claim time in the designing process .Taking the claim of time in contract into account ,we can limit the moral hazard of an agent and reduce the cost of the agent .In deed ,we can restrain the principal-agent activity of insurance agent more reasonable and fairly.4 This study set up a Principle-Agent model of stock options based on the new results of Executive Stock Option. On the basic of this, analyze the defects of traditional Executive Stock Option, and set up the incentive method of Asian options instead of traditional methods. The Executive Stock Option will improve the effect of Principal-Agent. By introducing the time element into the above general model, this essay set up an improved principal-agent model of Executive Stock Option, and basing on this, proposed a practical designing of Executive Stock Option contract by a indirect method innovatively.