Research On The Motivation Of Dynamic Adjustment Of Equity Incentive Schemes

Equity incentive is a common payment arrangement in China’s capital market,and also an important corporate governance mechanism to improve company performance and promote innovation.Therefore,designing an effective and appropriate equity incentive scheme is crucial for fully exerting the role of equity incentive.However,there is no universal equity incentive scheme.It has been proved in Chinese capital market that different equity incentive schemes have different effects in different scenarios,and enterprises chooses different equity incentive schemes in different periods and market environments.Studies at home and abroad have proved that the designation of equity incentive scheme is not "one size fits all",but should be adjusted according to the actual situation.In order to explore the motivation of dynamic adjustment of equity incentive schemes,this paper aims at 11 equity incentive schemes of GOODIX from 2016 to 2022,starting with corporate governance factors,corporate strategy factors and human resource demand factors,to explore the main motivation of dynamic adjustment of equity incentive schemes.First of all,this paper combs the existing literature on the selection motivation of equity incentive contract elements,and finds that the research focuses on the static selection of contract elements;Some scholars also discussed the adjustment of equity incentive schemes from a dynamic perspective,but only for a single contract element,which lacks comprehensiveness,and involves less contract elements other than incentive mode.Secondly,this paper builds a framework of basic theories,analyzing research questions according to Principal-agent theory and Contingency theory.Under the former one,the Optimal Contract theory and Managerial Power theory arise,analyzing the motivation of equity incentives from positive and negative sides.On the basis of the Optimal Contract theory,it also introduces the benefit synergy effect,risk bearing effect and golden handcuff effect of equity incentive,combined with opportunistic motivation,further enriches the framework for exploring the dynamic adjustment motivation of equity incentive scheme in this paper.Then,this paper introduces the basic situation and development history of the case company GOODIX,as well as 11 sets of equity incentive schemes from 2016 to 2022.Starting from multiple contract elements,this paper analyzes the dynamic adjustment rules of the scheme,and divides its dynamic adjustment process into four stages,and then compares their characteristics.According to dynamic adjustment rules under aforementioned theoretical framework,this paper analyzes the main motivation and main path of adjustment from three dimensions: corporate governance,corporate strategy and human resource demand.Finally,it summarizes main reasons for the dynamic adjustment in equity incentive plans and gives suggestions.From the perspective of corporate governance,the basic motivation for the dynamic adjustment of equity incentive schemes is to improve corporate governance and corporate performance through benefit synergy effect.From the perspective of corporate strategy,the motivation is to match the company’s strategic changes through the risk-bearing effect,and promote innovation and strategic transformation;From the perspective of human resource demand,the basic motivation is to attract and retain talents through the golden handcuff effect,and also to stimulate value creation through the risk-taking effect.As for the contract elements,the main motivation for the adjustment of the incentive model is the strategic changes in each period and the changes in the organizational structure of the management;The adjustment of incentive scope and incentive object is mainly driven by the reduction of state-owned institutional investors and the demand for human resources;The adjustment of performance conditions is mainly driven by strategy.This paper attempts to provide suggestions for Chinese public corporations to adjust the equity incentive schemes with considering the internal and external environment and characteristics through case analysis,avoid the lack of adaptability of the equity incentive plan,and let equity incentive helps companies to strengthen their corporate governance,strategic adjustment and talent allocation.