The Research On L Company’s Equity Incentive Plan Based On EVA

With the separation of the enterprise ownership and management,“moral hazard" and "reverse selection" problems have been created.As a long-term incentive mechanism,equity incentive solves the two-way differentiation problem by transforming the manager’s identity and achieving the unity of the two goals.It promotes the development of enterprises.However,Chinese existing equity incentive still has many drawbacks.Lack of effective stock market;Non-scientific evaluation indicators;still having moral hazard.Therefore,it is very important to design a set of scientific and effective equity incentive plan by selecting the value index which can reflect manager’s effort.This paper takes L’s existing equity incentive plan as the research object,analyzing the design and implementation of the program.Enterprises in the design and implementation of the program exists some drawbacks which is the object of the selection,unlock the conditions and the determination of the price.In the original incentive scheme,the setting of the unlocking condition adopts the traditional performance evaluation index,without considering the related equity cost which can not reflect the real wealth of the shareholders.The determination of exercise price is based on a fixed single stock price as the exercise price,lack of flexibility and volatility,so it is difficult to avoid the manager of the "free rider" phenomenon.It is very important that L needs a set of scientific equity incentive program,to more scientific and effective assessment of the level of manager’s efforts.As to EVA,on the basis of considering the relevant cost of enterprise financing,excluding some external factors,and closely linked with the shareholders of wealth,it can better solve the L problems which is in the incentive program design.Based on the cost of debt and equity,this paper puts forward a set of dynamic incentive scheme based on EVA and the market valuation parameters which consider the controllable factors of the industry.In this new model,the article proposes the design model of EVA-based equity incentive model firstly.Then according to L annual financial value design a set of incentive program.Making relevant safeguard measures ensures the operation of this scheme afterwards.Finally estimate the effect of this model.In this mode,excluding the abnormal fluctuations in the stock market,more scientifically assess the manager’s efforts to ensure the incentive effect.Making the manager’s goal is consistent with shareholder’s goal to a reality certain extent andthis phenomenon can increase shareholder gains.It is hoped that this model can provide some reference for the other enterprises.