Optimization Of Human Capital Incentive System

In the modern era of knowledge economy, competition between companies is ultimately acompetition of knowledge and talent. It is a result that domestic and foreign companiesrecommend talent strongly to expand its own brain trust, explore and implement a variety ofincentives actively for company executives as well as senior technical staff, as one of theincentives, equity incentive system has gotten a large degree of development. However, due tothe immaturity of the china’s capital market and the deficiency of the equity incentive system,there are some problems in the implementation process of the equity incentive system. The mostimportant performance is the resignation monetizing of executives of many listed companies,especially GEM listed companies, which has a very great impact on many companies and theentire market economy. But essentially, the real problem is that equity incentives don’t fullyconsider the growth of company which executives can really bring in the long-term future.Because of this, many executives take the opportunity to overestimate the company’s growth infuture, and raise the stock price. On one hand, they want to create their own performance; on theother hand, they can achieve the purpose of monetizing by resignation.The article firstly analyzes the resignation monetizing of executives of the listed company, andthen deeply analyzes the cause of that behavior: the existing equity incentives have its inherentproblem-overestimate the company’s future growth. Then it analyzes the nature and the hazard ofoverestimating the company’s future growth, and proposes a way to prevent the executives fromoverestimating the company’s future growth. In order to protect the company’s growth fromdamage, it should be strictly limited that investors get higher issue price of stock byoverestimating the company’s growth to do harm to the stock market by monetizing. The specificmeasures include evaluating the investment through promised income approach, investor ofhuman capital cancelling shares when they exit from the company, the public offering price linked with the guaranteed minimumgrowth from special equity holders.This article deeply analyzes and researches the problem of the existing equity incentives from anew perspective, and proposes corresponding countermeasures. I believe this study has a verypractical significance: on the one hand, it can solve the problem of the existing equity incentives,combine the interest of executive and the company, and reduce the loss of talent, so it can behelpful for the healthy development of the company; on the other hand, it can improve thestability of the entire market economy, avoid the fluctuation of the stock market.