A Case Study On Equity Incentive Of J Company

The principal-agent system has become the mainstream mode of enterprise management because of the separation of shareholder right and management right.It has been found that that share incentive system is useful for reducing the “Agent Cost”.Stock incentive gives executives certain shares to align managers' interests with the enterprise,thus making shareholders and managers become a community of common interests.The stock incentive model can promote the enterprise managers to invest more attention into the long-term operation and the appreciation of asset value when making decisions on enterprise strategy,and solve the shortsighted problem of the operators.J company is a leading manufacturing enterprise of small household appliance in China,which was a typical family enterprise.After determining the acquisition intention with foreign capital in 2006,it implemented the equity incentive for the first time.In this paper,we take the stock incentive system model of the private enterprise as the target to analyze the motive and improvement of the design of the equity incentive scheme,and to evaluate the performance of the stock incentive scheme according to financial indicators and human resources.Using the incentive effect to analyze the advantages and disadvantages of incentive scheme,and give reasonable improvement suggestions for the existing problems.Firstly,the case analysis concludes that equity incentive system plays a role in promoting the growth of enterprise value when the financial index of company J changes to a positive trend after the execution of stock incentive system.Secondly,companies should choose reasonable equity incentive schemes in line with its property to reduce the cost of agency by agreement.The paper takes the analysis of changes and improvement brought by several stock incentive schemes executed by the typical private company J as a reference for other private enterprises,wishing that is beneficial for promoting scientific and technological innovation of private enterprises and reducing the loss of talents.