Analysis And Design Of Equity Incentive System In China Merchants Bank

As an innovative incentive system is necessary in the era of knowledge-driven economy, equity incentive system is offered possibility of practical operation after split share structure reform is completed in our capital market China Merchants Bank, the state-owned holding listing enterprise, takes major step forward in exploration and practice of equity incentive system. The summary and research on the gains and losses of equity incentive system of China Merchants Bank is of great significance to research and reference with regards to whether equity incentive system should be continued in our state-owned holding companies.In this article, equity incentive plan in China Merchants Bank is briefly discussed and the promotion process and incentive system design are theoretically analyzed. Merits of promotion process and shortcomings observed at present are indicated. It further studies the relevance between performance and share price of China Merchants Bank by comparing the performance of the bank during2005to2011and the performance of stock A and stock H. The findings are, since the execution of high management stock appreciation right into stock H, there is no high relevance between the bank’s performance and share price, and, after comparing with the performance data of China Minsheng Banking Corp. Ltd in these four years, there is no significant difference between the execution of stock H stock appreciation right and the bank’s performance. All are attributed to the shortage of effectiveness in our securities and capital markets and not all market information reflected from share price. High management equity incentive system design does not increase share price as internal impetus, incentive object does not satisfy the hypothesis conditions of running equity incentive system and it is difficult to produce positive cycle. Equity incentive system plays restrictive incentive and restriction role on high management staff because there is no effective market competition and the selection and appointment of such staff is not wholly a market behavior.Through the research, demerits and shortcomings still exist in equity incentive system operated by China Merchants Bank. Seeking, modification and revision of the conflicts reasons will be a solution. It needs further perfect the legal system guarantee conditions required by implementing equity incentive system are further perfected. Pegging conditions and acquisition method of equity incentive system are further corrected. Further promote the establishment of human resource competitive market and product competitive market with fair opportunity. During operation is standardized in company, it will optimize ownership system and design equity incentive system from three levels in company by dividing staff who have different incentive needs, and implement the authorization degree of staff required by executing stock inventive system and the awareness of sense of ownership.Through analyzing and perfecting stock inventive system in high management, it provides reference and practical experience for designing stock inventive plan for staff in each level. Thusly, the experience and lessons of equity incentive targeting at high management is absorbed in the process of designing and promoting equity incentive system. Thus, only combining design of equity incentive system with standardization of enterprise business management can make it possible to design equity incentive plan as practicable by considering reasonability of equity incentive system and studying risk preference, demand level and other particular factors of incentive objects. Full use of equity incentive system will contribute to the increase of enterprise performance.