Research On The Effect Of Virtual Equity Incentive Plan Of Huawei Company

After the policy of reform and opening up was carried out on the third Plenary Session of the 11 th CPC Central Committee in 1978,China was awaited to be rebuilt.Many companies sprung out like mushrooms after spring rain since China entered into market economy era from planned economy era.Among those companies,HUAWEI Technology Co.Ltd.which was founded in 1987 has a history of only 30 years.Commendably,the little-known private enterprise has survived in numerous ups and downs on business,this enabled HUAWEI to become the largest manufacturing industry on telecommunication equipment,the largest private enterprises in China.HUAWEI ranked 83 among the world top 500 enterprises on "fortune" magazine in 2017 with annual sales income of $75.103 billion(512.574 billion RMB).HUAWEI becomes a giant which is able to formulate industry standards with countless intellectual property rights from the original general switch agent.HUAWEI has surpassed CISCO,ranking No.1 in the field of network devices and supporting services.What's more,It ranked No.third worldly in the field of mobile devices after Samsung and apple.The small company which had only dozens of employees before became a giant multinational enterprise with more than 1.8 million employees at home and abroad.So,what helped HUAWEI to overcome those daunting challenges and created such brilliant achievements? Apart from products and market,it is the salary incentive system which run through HUAWEI's entire lifeline unique helps HUAWEI to be successful.Especially its' the virtual equity system with virtual restricted stock as the representative stimulates the employees of HUAWEI to struggle for the same purpose.HUAWEI creatively put forward and carried out an incentive method combined of employee stock ownership plan(ESOP in short)whose carrier is virtual equity and time unit plan(TUP in short),what's more,HUAWEI established supporting system to ensure effective implementation of equity incentive in the process of implementing equity incentive.This paper takes HUAWEI's virtual equity incentive as the research object to explore the impact of the virtual equity incentive plan on the performance of company.First of all,according to the domestic and foreign scholars,the related theories of equity incentive and employee stock ownership and virtual equity are analyzed,and the relevant expectation theory and principal-agent theory are summarized,the relevant concepts and usage of virtual equity are defined;Secondly,considering HUAWEI's unique salary incentive which is a factor for HUAWEI's success.All the things concerning HUAWEI's equity incentive are mentioned to expound how did HUAWEI transfer from owning real equity to owning virtual equity and HUAWEI's present virtual equity system is summarized;Finally,a comparative analysis is conducted between the characteristics and effects of HUAWEI's virtual equity incentive system and Zte Corp with the most reference value in the same industry.The innovation of this paper is to combine HUAWEI's virtual equity incentive and performance by adopting EVA model,EVA's characteristics and specific implementation modes is analyzed.HUAWEI established a unique virtual equity system and a series of corresponding incentive measures,they are combined with the operation of the company,retaining existing talent and attracting talents outside.At the same time,HUAWEI combined employees' earning the performance of company by combining ESOP and TUP and other incentives to combine long-term incentive and short-term incentive so that employees can work on their own initiative.It is hoped that this paper can help to analyze the characteristics and implementation of HUAWEI's virtual equity incentive system and play a referential role in the selection and implementation of other employee incentive programs.The object of this paper is private enterprise-HUAWEI company,the accounting standards used is international accounting standards IFRS,there may be some inconsistencies in financial data caliber,many core data are not publicly available too.What's more,HUAWEI disclosed its' financial data for just a while,company's early financial information can't be inquired and the author has limited ability,so the research of this paper is not deep enough,the conclusion may exist some shortcomings.