Effects And Improvements Of Equity Incentive Plan In A-company

With the development of China’s capital market and rapid expansion of enterprises scale,the demand for professional managers is increasing and the phenomenon that managers recruit or hire professional managers and enterprises separate ownership from management right appears.In order to reduce agency cost and prevent managers from damaging the interests of shareholders,equity incentive is adopted by many companies.Equity incentive has been applied in the whole world after many enterprises in the United States and other developed countries’ practice and promotion.The equity incentive in China starting relatively late,the promulgation of Measures for the administration of equity incentive of listed companies(for Trial Implementation)in 2005 marks the formal entry of equity incentive into China.The implementation of The Measures on August 13,2016 plays a guiding role in the equity incentive of Listed Companies in China.This paper expounds the equity incentive and its related theories,analyzes and evaluates the effect of equity incentive of A-Company from three aspects of financial,management and competitive dimensions by adopting the method of comparative analysis and case analysis.Through the analysis and comparison of A-Company’s profit,debt paying ability,operation and research and development and other aspects before and after the implementation of equity incentive,we have found that A-Company’s operating performance has improved.It is found that A-Company’s operating performance is better than the industry average in the implementation stage of equity incentive mechanism while comparing crosswise and analyzing A-Company and industry mean.However,after Comparing A-Company with other pharmaceutical companies’ operating performance who implemented equity incentive,we found that A-Company is slightly lower than the average value of these enterprises in terms of profitability and other aspects,which shows that the incentive effect of equity incentive program to A-Company may be a little lower.We found that even though in some regards such as profitability,operations,R&D investment and output have achieved some results,it exhibits some kind of executive welfare tendency in terms of the selection of incentive objects and performance evaluation index according to analyzation and evaluation of the effect of equity incentive of A-Company.Aiming at the problem of A-Company’s equity incentive program design and getting a more significant incentive effect,A-Company should set a longer period of validity in the second phase of the equity incentive plan,bring R&D personnel into the incentive objects,set reasonable performance evaluation criteria and take other effective measures.