Study On Equity Incentive Effects Of Talented Employee Retention

Since the promulgation of "Management methods of equity incentive listingCorporation (Trial)" in December31,2005，China Securities Regulatory Commission hasalso issued three memorandums to further standardize equity incentive, which make the useof equity incentive more extensive, and it has become one of the increasingly popularcompensation ways. Compared with the general cash compensation, equity incentive is along-term incentive compensation mode, it needs to set a waiting period, anyone hopes toachieve earnings must stay in the company during the waiting period, it is like a pair of"golden handcuffs" to make staff locked so that the company can achieve the purpose ofretaining talented employees.One of the purposes of equity incentive is attracting and retaining talents. However,since the2008financial crisis, domestic and international economic situation and the stockmarket has changed dramatically, China stock market fluctuates considerably, manycompanies‘stock price fall, stock options become "underwater options," restricted stocksalso lose their value. Therefore, in order to retain talent, part of the companies revoked theoriginal equity incentive plan and announced a new equity incentive plan which adjustedthe exercise price. In an increasingly competitive market in the21st century, talent is thecore competitiveness of enterprises, but the latest statistics show that in2013the industryaverage employee turnover rate is16.3percent, talent retention is imminent. Therefore,some companies in the implementation of an equity incentive program will also choose toannounce another, that is to implement the second or even the third equity incentiveprograms to attract and retain talents.In summary, this paper make use of revoking the original equity incentive programand announcing a new one(hereinafter referred to as" revoking and then re-announcing ") orcontinuously announcing and implementing two or more equity incentive program(hereinafter referred to as "not revoking and then re-announcing ") to study the retainingtalent effect of equity incentive.In this paper, we select the companies that have announced and implemented an equitycompensation plan during the period from January1st,2006to December31th,2013, Weuse paired samples T test and multiple linear regression method to explore the effects of equity compensation on retaining talents. The results are as follows: the executives turnoveris significantly lower in the companies revoking and then re-announcing an equity incentiveprogram, compared with the companies revoking and then not re-announcing an equityincentive program, what is more, re-announcing and the executive turnover rate have asignificantly negative correlation, therefore, re-announcing can effectively reduce theexecutive turnover rate; the turnover of the executives, non-executives and the wholeincentive object are significantly lower in the companies not revoking and thenre-announcing an equity incentive program, compared with the companies announc ing anequity incentive program only once, what is more, re-announcing and the turnover rate havea significantly negative correlation, therefore, re-announcing can effectively reduce theincentive object turnover rate. In short, equity incentives can effectively reduce employees‘turnover and achieve the purpose of retaining talents.