China's Enterprise Managers Share Option Incentive Application

Having participating The World Trade Organization, Chinese enterprises have to confront a new situation, in which there are both challenges and opportunities. In the meantime, some enterprises pertaining to Chinese government are reformed. So, we can say that Chinese enterprises are experiencing a great change. In the change, how to survives and further develops is a first important question to all Chinese enterprises. To introduce a new and effective incentive system will be greatly helpful to Chinese enterprises. The best choice of incentive model is the ESOP, the Executive Stock Option Plan, which is a relatively superior, and has been prevailing over nearly all American enterprises for long time. But because of some laws and regulations of China, the mere ESOP will face to some barriers. To research a substitution of the mere ESOP , which called EOOP, the Executive Ownership Option Plan, is the basic task of this paper.At first, I make a general introduction of the EOOP, including its concept, applicability , incentive principle, to make a foundation of EOOP. Then I design necessary elements of the EOOP, and analyze relationship among elements to construct the basic frame of the EOOP. Further, based on these elements, I design a general program, which is helpful to instruct the practice of the EOOP. Usually, the quantitative analysis and the technical method, which in fact are the weakest links of domestic research of the EOOP, are the most important to a option incentive plan. Thereby, the quantitative analysis and the technical method take a big part of the paper. Based on Chinese enterprises particularity, I make a great number of quantitative analysis, and design some model to meet the need of practice, including the option value model, the option quantity model and the adjusting model of exercise price. Furthermore, I make some necessary analysis of the personal capital. According to the practice of the American companies, I construct a evaluation model of personal capital.According to the paper, the Executive Ownership Option Plan is very applicable to Chinese enterprises, which can effectively solve the problem of moral hazard. Through analysis of elements , formulation of basic program, design of technical method, I have made a useful research to the practice of Executive Ownership Option Plan in Chinese enterprises.