The Research On Employee Stock Ownership Plans Of Zhongtong Technology Co., Ltd.

Firms with employee share ownership plans (ESOPs) in America often claim they increase twice productivity,50% more profits,64% more sales than those not implementing the plans. In China, The Third Plenary Session of the 18th Central Committee of the Communist Party of China (CPC) suggested that our country should achieve ESOPs and form a benefit community between capital owners and workers under the condition of mixed ownership economy. This proposal is influential and has gained considerable attention with the increasing cases and practices of ESOPs. This paper aims to help Zhongtong Technology Company, whom the authors are working for, make a theoretical and practical exploration about the design and implementation of incentive mechanism of ESOPs.We first hold an in-deep investigation about the situation and problems of Zhongtong’s ESOPs incentive mechanism and analyze the cause of these problems with inside and outside environmental analysis, industry and business analysis. Zhongtong is an unlisted, high-tech, limited and joint-ventured company with state-owned holding enterprise as a legal person, mixed ownership. To tailors these special requirements and characteristics, based on the fundamental theories of ESOPs, we learn from empirical research at home and abroad and use methods like the theory with practice, practice and theory analysis, case analysis to design the suitable ESOPs for Zhongtong. Then, we combine the case’s countermeasures with problems and propose the specific operating points and implementation schedules for the preparation, implementation steps and key points, difficulties and solving measures, after evaluation and continuous improvement.The main novelty of our paper is that the carrier of employee shareholding takes the trust ownership method. First, both the company union and trust company act as trustees while employees act as the beneficiary, the union and the trust sign a fiduciary contract that the company entrust the money or equity raised from employees the trust, so the trust act as institutional shareholders in the company and offers trust loans to non-wealthy employees without sufficient equity capital. Second, it solves the problem that the employees in joint venture enterprise cannot directly act as shareholders and effectively solves the problems of taxes, high costs, and reserved shares. Third, this method can keep the equity diversification from influencing the decision-making and excessive diluted shares from causing the operating management difficulties. Also, with the trust’s expertise, it can optimize the employee shares and perfect the corporate governance structure, which makes the company’s decision-making more democratic and scientific. In the end, it realizes employee’s indirect shareholding and safe guard the interests of the shareholding employees to the maximum extend.This paper conducts an empirical study about the incentive mechanism of ESOPs in Zhongtong, which can effectively solve the problem of Zhongtong’s lack of long incentive mechanism and is referable and valuable to similar enterprises planing to implement ESOPs incentive mechanism.