Economic Value Added (eva) In The Performance And Compensation Management Of Listed Companies

Economic Value-Added, EVA, is popular among many large international companies as an index of performance evaluation and compensation incentive. The article simply describes the development and financial concept of EVA, compares the pros and cons between traditional performance evaluation indexes and EVA, suggests to establish a new compensation system for managers, characterized by EVA-centered and no-ending-rewards, modifies currently-used variable salary formulae, and develops a variable salary payout method, called Variable Salary Bank. It will, therefore, improve incentive effect of variable salary, avoid short-view behavior of managers effectively, and make consistent long-term interests of managers and shareholders. Nevertheless, Chinese market is not that mature till now, and law system is not that effective. So, if EVA incentive system is implemented, it requires making a research and analysis on external and internal environment and factors, in order to avoid awkward situation resulted from irrational EVA usage.