Case Study On Equity Incentive Plan Of Midea Group

The 14th Five Year Plan period requires high-quality economic development and give full play to the driving role of innovation in development.As an important subject of market economy,how to absorb talents,improve technological innovation ability and promote the realization of enterprise strategy has become an urgent problem to be solved.In this context,equity incentive,as a long-term incentive mechanism conducive to the development of enterprises,has become a tool used by most companies to bind the overall interests of managers and companies,so as to reduce the short-sighted behavior of managers and make them carry out daily business activities from the perspective of long-term development of the company.In recent years,the CSRC and SASAC have issued the revised measures for the administration of equity incentive of listed companies and the guidelines for the implementation of equity incentive by listed companies controlled by central enterprises,which have continuously refined and standardized the scope of incentive objects,assessment system,management measures and information disclosure,and guided all kinds of listed companies to implement equity incentive plans.Although under the background of continuous improvement of the system,China’s equity incentive shows an upward trend as a whole,there are also many cases of equity incentive failure caused by listed companies’ own equity incentive scheme design errors,imperfect internal governance structure and other reasons.Midea Group has tried equity incentive since 2011.So far,it has formed a complex equity incentive model with rich incentive objects and diversified equity incentive methods,and used equity incentive to promote strategic transformation and upgrading.At present,the academic research on equity incentive mostly focuses on the impact on performance,ignoring the supporting role of equity incentive on strategy.Therefore,this paper will analyze the cases of Midea Group using equity incentive,and summarize the successful experience and enlightenment,in order to provide a valuable reference for other listed companies to implement equity incentive.Taking Midea Group as the research object,this paper comprehensively uses three methods:literature research method,case analysis method and comparative analysis method.Firstly,after systematically combing the relevant literature of equity incentive,this paper defines the concepts of equity incentive,enterprise innovation and enterprise performance,and expounds the meaning of equity incentive,equity incentive elements,enterprise innovation measurement indicators,enterprise performance evaluation methods and effect evaluation methods.It is clear that this paper uses financial index method,non-financial index method OKR performance evaluation method to evaluate the equity incentive effect of Midea Group.Secondly,under the guidance of relevant theory basis,this paper analyzes the equity incentive cases of Midea Group.In this part,it gives an overall description of Midea Group’s strategic transformation and upgrading,and focuses on the motivation and specific contents of different equity incentive schemes launched by Midea Group under the background of three strategic transformation and upgrading,as well as the modes,methods and methods of equity incentive schemes in different stages.The differences between incentive objects and performance indicators and assessment conditions are analyzed.Finally,through the financial index method and non-financial index method,this paper analyzes Midea Group’s financial performance,agency cost,innovation ability and strategic development.Under the OKR goal and key achievement method,it is considered that Midea Group’s equity incentive has achieved the three goals of reducing agency cost,improving innovation ability and promoting strategic development,which are reflected in good financial performance.It is a relatively successful case.Through the overall analysis of the case,the following conclusions are finally drawn:（1）Midea Group has rich equity incentive levels and high matching between incentive objects and incentive models;（2）Midea Group’s equity incentive plan is dynamically adjusted to meet the needs of enterprise strategic transformation and upgrading;（3）Midea Group’s equity incentive scheme has a good overall implementation effect and plays a positive role in the realization of the strategy;（4）The success of Midea Group’s equity incentive lies not only in the rationality of the scheme and the realization of the goal,but also in its establishment on a good organizational structure.Through the analysis,it is concluded that enterprises should formulate a scientific equity incentive plan,closely combine the equity incentive with the content of strategic development,consolidate the institutional foundation,and create a good internal environmental foundation for the implementation of equity incentive.