The Research Of Problems And Countermeasures In Equity Incentive On GEM

At the end of19th century, due to the development of our society and theincreasingly fierce market competition, enterprise scale showing the trend oflarge-scale, and the enterprise management are becoming increasingly sophisticated.This kind of environment puts forward higher request for enterprise management, theshareholders as enterprise management can not meet the requirement of modernmarket any more, shareholders in the concept of modern enterprise began to hireexternal high-quality professional managers of the enterprise, and the separation ofownership and managerial authority come into being. The separation of ownershipand managerial authority lead to produce the relationship of principal-agent betweenowners and operators, but the goals and interests of the owners and operators aredifferent, and they are both in the aspect of information asymmetry, the trustee as theoperator has more information advantage, the conflict between owners and operatorslead to agency costs. To reduce agency cost and achieve the goal of enterprise valuemaximization, modern enterprises need to establish incentive and constraintmechanism for enterprise management. Under this background, the equity incentiveas an effective solution to the problem of principal-agent mechanism is graduallywidely used.As a kind of long-term incentive, equity incentive mechanism is a importantmeasure for solve the principal-agent problems. Our country capital market start latelyand the development is not perfect, equity incentive is not implemented widely. Thecompletion of the reform of non-tradable shares and the issue of national regulationsprovides a good institutional environment for the implementation of equity incentiveof listed companies in China.China’s GEM started to trade officially on October30th in2009. Many privateenterprises that have innovation ability and high growth have been listed on the gem.In order to effectively solve the principal-agent problems, retain talent resources in thefierce market competition and achieve the long-term stable development of theenterprise, many listed companies on GEM begin to implement equity incentive. Howto carry out the equity incentive? What problems are they facing? How to perfect theequity incentive mechanism? In this paper, we research the problems of the listedcompanies on GEM with all this questions. This article elaborate the study of the equity incentive of domestic and foreignscholars, defining the relevant concepts, and expounds the necessity and importanceof the implementation of equity incentive in the perspective of theoretical analysis.This paper combined with the implementation of equity incentive system environmentand its own actual situation of the listed companies on GEM in our country, and putthe equity incentive scheme of HK company as the breakthrough point. Firstly,introducing the contents of the company equity incentive. Then analyzing the meritand shortage of the equity incentive. At last, finding the original meaning of equityincentive through the further analysis of it.In the last part, we come to the following conclusion:Firstly, when the listed companies choosing equity incentives, they shouldconsider the efficiency of capital market, industry type and the factors such as theenterprise life cycle.Secondly, the performance evaluation indicators have the function of guidance tothe management, and have strong realistic effect on improving the managementefficiency. Therefore, in the consideration of the imperfection of the stock market, weshould establish multivariate equity incentive assessment indicators, including marketperformance and accounting performance.Thirdly, for the setting of exercise price. First of all, the equity incentive planshall not built when the market price is higher than the value of the company,selecting the period that market price is lower than or close to the value of thecompany; then, because of the weak correlation of our country stock market, theinfluence of the non market performance factors is very obvious, the listed companyin setting strike prices can use the method of strike prices index. It means that:considering the operating performance of listed companies, uncertainty of capitalmarket, stock index and the stock price when you setting strike prices, at the sametime, according to the change of market index to make corresponding adjustments tostrike prices for determining the efficiency of equity incentive.Fourthly, when setting up the equity incentive plan, the companies shouldconsider their long-term development strategy, then properly extending the limitation.On the other hand, properly extending the vesting period.