The Validity Of Stock Incentive

During the half century of using stock incentive as a kind of incentive for managers in theEuropean and American countries, it played an important role in ease the contradiction between managersand owners, reduce agency cost and improve the efficiency of the company. Stock incentive made a hugesuccess in improving corporate governance. Since1900s, enterprises in our country began to use stockincentive as a mean to solve problems appeared in the process of enterprise development, which also hasobtained achievements.With the widely use of stock incentive in enterprises, the validity of it has become an issues ofconcern. Although stock incentive has achieved certain results in practice, but there are still manyproblems. High level of stock incentive index can not effectively play the utility of stock incentive. Thelow price of the stock was suspected to be a welfare for managers. And the concentrated exercise willcause loss of the year. And the plan of the incentive can hardly form a long-term incentive system.Although, stock incentive has been widely used now, the utility of the schedule should be discuss inparticular enterprise environment.This paper, taking the two stock incentive schemes of Shanghai Jahwa as the research basis,through comparing the similarities and differences between two plans and analysising the financial andnon-financial indicators, analysis the effectiveness of the stock incentive plan of Shanghai Jahwa. Besides,this paper tries to dig deeper to find the specific factors which make the incentive effective and gives somesuggestion to make a real good stock incentive plan.