Research On The Effectiveness Of Tonghuadongbao's Compound Equity Incentive

With the development of economy,the increasingly perfect equity incentive mechanism plays an increasingly important role in solving the problem of enterprise commissioned agency and stimulating the enthusiasm of employees.According to the Chinese entrepreneur value report(2017),the number of listed companies that implemented equity incentives increased significantly from 2011 to 2016.As of 2016,the listed companies in Shanghai and Shenzhen have announced equity incentive plans has up to 910.In this situation,the single equity incentive model has not been able to fully satisfy the incentive needs of various listed companies,and the composite equity incentives models adopted of two-or-more has emerged.Therefore,how to take advantage of the effectiveness of compound equity incentives,and combine the advantages of multiple single-equity incentives,has become the most concerned issue for listed companies intending to implement compound equity incentives.In July 2014,Tonghuadongbao announced and implemented a comprehensive stock option incentive plan that simultaneously grants restricted stocks and stock options to the incentive targets,striving to simultaneously exert both incentives.This article first summarizes the domestic and foreign relevant literature and theories that summarize the evaluation criteria of equity incentive effectiveness,influencing factors,and incentive effects.Second,the Tonghuadongbao compound equity incentive program is considered as the research object,combining four financial factors of operational capacity,profitability and debt repayment ability with three non-financial factors,namely stock price reaction,human resources and corporate innovation capabilities to evaluate the effectiveness of this stock incentive in the vertical direction.And the efficiency coefficient method was used to compare with the same industry companies for the horizontal validity.Then the conclusion that Tonghuadongbao compound equity incentives are positively related to company performance is concluded.Not only does it significantly improve the company's profitability,it compares with the companies that lack of equity incentives and the implementation of only one type of equity incentives.The ranking of the comprehensive capabilities for the enterprises has alsorisen steadily.Finally,relevant proposals for the implementation of effective equity incentives are proposed based on the contractual elements design of the case.In this paper,by studying the effectiveness of Tonghuadongbao compound equity incentives,we can provide reference for stakeholders who intend to evaluate the effectiveness of compound stock option incentives.At the same time,we hope to serve as a reference for companies that intend to design equity incentive contract elements.