Case Study On Motivation And Effect Of Employee Stock Ownership Plan Of Goertek Limited

The employee stock ownership plan(ESOP)is mainly funded by the company’s employees or subscribed part of the company’s equity,and the holding institution directly participates in the operation and management of the company on behalf of the stockholders,and to a certain extent,directly holds the management and residual claim rights of the company,through the implementation of the plan can effectively reduce the agency costs of the company,improve the management level,and thus improve the company’s operating performance.ESOP was shelved at the beginning of China’s reform and opening up until 2013,when the General Office of the State Council approved the Opinions on Deepening the Reform of the Income Distribution System and ESOP regained the attention of the society.In order to promote the standardized management of ESOP and form a corresponding authoritative management mechanism,the Securities Regulatory Commission issued the "Guiding Opinions on the Implementation of ESOP in Listed Companies on a Pilot Basis" in2014.However,due to the late implementation of ESOP system,which is not yet fully mature,there are few relevant case studies,and the motivation and effect of ESOP need to be studied in depth.This paper selects Goertek,which has implemented ESOP earlier,as the object of study.As a leading enterprise in the electronics industry,Goertek responded positively to the policy call and combined with the internal needs of the enterprise,and started to develop and carry out ESOP in 2015,which can examine the longer-term implementation effect and has important research significance.This paper adopts the literature research method to sort out the current status of research and theoretical basis of ESOP at home and abroad,and on this basis,the analysis finds that the reasons for Goertek to implement ESOP are as follows: firstly,ESOP is boosted by favorable policies;secondly,the industry competition intensifies,and it needs to expand its competitive advantages and stand firm;thirdly,it is to make up for the negative impact caused by the failure of the first phase of the equity incentive plan;fourthly,it is in order to absorb and motivate talents and improve employees’ work motivation;the fifth is to cooperate with the major shareholders to carry out large-scale shareholding reduction.Subsequently,this paper uses the event study method and ratio analysis method to evaluate the implementation effect of Goertek’s ESOP from three aspects: short-term market response,financial performance and non-financial performance in multiple dimensions.In terms of short-term market effect,the implementation of ESOP has no significant positive impact on the market;in terms of financial performance,the implementation of stock ownership plan has no significant positive impact on profitability,solvency,development capacity and economic value added,and the incentive effect on operating capacity is more significant and reduces the agency cost of the company;in terms of non-financial performance,the implementation of ESOP attracts more talents to join the company and In terms of non-financial performance,the implementation of ESOP attracts more talents to join the company and increases the company’s innovation ability.Finally,this paper discusses the following problems in the formulation and implementation of ESOP of Goertek: unreasonable timing of the share ownership plan,single source of shares and funds,low number of share holders,and unsound management measures of the share ownership plan.In response to the above problems,the following insights and suggestions are obtained: the key to the success or failure of ESOP is whether the timing of the launch is appropriate,the design of ESOP should be reasonable and the company needs to establish a sound internal monitoring mechanism.