Equity incentive is mainly to give employees some shareholders' rights and interests by attaching conditions, so that they have a sense of ownership, thus forming the same body of interests with enterprises, promoting the growth of enterprises and employees, and thus helping enterprises achieve the long-term goal of stable development. Now, let's take a look at the following two articles about the design of equity incentive scheme!
Key points of equity incentive scheme design and agreement
I. Definition of rights
Equity incentive should first clarify the nature and restrictions of incentive equity, and effectively prevent potential risks while ensuring the incentive effect. Equity is the cornerstone of the company. Once there is a dispute, it is serious enough to shake the company's foundation.
Second, the right is mature
Compared with cash rewards, equity incentives can save the company's cash expenditure, and at the same time have a long-term mechanism: the company's interests and employees will establish long-term ties from now on, and the growth of the company's performance will also have future returns for employees. Based on this sense of belonging, employees are more motivated to make outstanding achievements.
iii. Grant of Rights
The grant of virtual equity is derived from the income corresponding to the equity of the shareholders, and it only needs the company, the shareholders and the incentive object to sign a tripartite agreement to specify the proportion of dividend rights granted to the incentive object and the calculation method of dividends in each period.
iv. assessment mechanism
after the incentive equity is granted, an assessment mechanism must be set up to avoid the situation of slacking off and waiting for dividends. The assessment mechanism may vary according to different positions, and there are many calculation details, which need not be detailed in the equity incentive agreement, but the target responsibility letter signed by the company and the incentive object as an additional document of the equity incentive agreement.
v. loss of rights
the main purpose of equity incentive is to keep the core members of the company stable and realize the company's business objectives. The existence of incentive equity is consistent with the function of the incentive object, and there are differences on this point, and the company's business objectives cannot be achieved, so equity incentive should be terminated.
After the loss of incentive equity, the corresponding aftermath should be dealt with:
Ordinary equity incentive, in essence, is a conditional equity transfer, which is repurchased at the subscription price of the incentive object according to the mandatory buyback clause agreed in the transfer agreement, so as to prevent the resigned employees from continuing to hold the equity of the company and affecting the normal operation and management of the company; At the same time, the incentive object cooperates to complete the modification of the company's articles of association, cancellation of equity certificates and other changes in industrial and commercial registration matters. If it is only handled within the company, it will not have the publicity effect against the third party.
Virtual equity incentive, in essence, is a tripartite agreement between the incentive object, the company and the major shareholders, and its effectiveness is limited internally. Once the loss of rights condition in the agreement is triggered, the current dividend can be directly stopped and unilaterally dissolved according to the notification method agreed in the agreement; Dividends that have been distributed are recognition of the company's contribution to employees in the past and should not be recovered.
mixed equity incentive is essentially a transition from virtual equity incentive to ordinary equity incentive, and the industrial and commercial registration has not been completed, and the signed internal agreement is binding on the company. Therefore, after signing the corresponding dissolution agreement, the company and the incentive object will return the subscription consideration paid by the incentive object and stop paying dividends.
VI. Proportion of rights
The proportion of granting incentive shares should consider the company's current needs, reserve room for the company's development, and pay attention to the incentive cost.
ordinary equity incentive can even get cash inflow without the company's money, which seems to be a low-cost incentive method, but it is actually paying the company's future value.
although the virtual equity incentive does not directly consume ordinary equity, after the implementation of the incentive, the way, proportion and exercise conditions of the first phase will have a benchmarking effect on the subsequent incentives.
what should we pay attention to in equity incentive?
first, to avoid acclimatization
acclimatization means that as a boss, you must be able to control all the designs yourself. If so? Ren Zhengfei's boss? Then the design scheme is mainly based on dividends, and dividends can be cashed at the end of the year. If so? Ma Yun-style entrepreneur? Incentive policies are mostly based on value-added rights.
second, can the mechanism flow be realized?
This is the biggest difference between the equity incentive system and the salary system. The salary policy is compiled by the Human Resources Department. He did not seek the opinions of other departments in the process of compiling, or rarely considered the business model or other issues. However, the equity incentive system was led and compiled by the board of directors, which is the highest strategic decision-making department of the company. When formulating plans and policies, the company's business model and marketing strategy will be fully considered.
The key points of five equity incentive schemes
First, it depends on whether the company is qualified to engage in equity incentives
In this regard, the New Third Board has no regulations on listed companies, so we should refer to the regulations of the CSRC on listed companies at this time. Specifically, if there are negative opinions in the audit report of listed companies in the last year, or they cannot express their opinions, or they are punished by the CSRC in the last year, the company cannot engage in equity incentives. Therefore, the company must pay attention to the fact that the audit report should not be patched and should try to avoid being punished.
Second, performance setting
The core purpose of equity incentive is to bind the interests of employees and controlling shareholders or major shareholders together, so as to realize the binding of company performance and individual performance, otherwise equity incentive will deviate from its original intention. Therefore, one of the signs of the effectiveness of equity incentives is to see whether there are performance settings.
Third, we should consider the number and reservation of equity incentives.
For this issue, the relevant regulations for listed companies make it very clear: the total number of equity incentives should not exceed 11% of the company's total share capital, and a single incentive object should not exceed 1% of the total share capital. Generally speaking, listed companies are relatively large, and the amount of 11% shares is very large. Generally speaking, there are very few equity incentive plans of listed companies that exceed 5%.
Fourth, it is necessary to consider whether the target of equity incentive is qualified.
At present, there is no provision in this respect in the New Third Board, but the provision for listed companies is that directors, supervisors, senior managers, core technical business personnel and other employees that the company thinks should be encouraged can get equity incentive, but independent directors should not be included. Companies listed on the New Third Board can refer to the design of the new third board for additional issuance, that is, to implement equity incentives for directors, supervisors, senior managers and core personnel.
in principle, shareholders or actual controllers can't be the object of incentives, because equity incentives are intended to make the interests of employees and major shareholders tend to be consistent. If the actual controllers are encouraged, it will lose its due significance.
Fifth, we should consider whether to use options or stocks to motivate
Before an enterprise belongs to a limited liability company or is listed, it can be directly motivated by stocks. Especially when the company didn't introduce PE, there was no market price for shares, so it didn't need to be paid by shares. At that time, it wasn't a public company, and it didn't need the supervision of accountants. Usually, shares can be directly used as equity incentives, or they can be held by proxy.
13 key points of equity incentive scheme design
There are many issues to be considered when designing equity incentive scheme. Will the scheme be designed after considering these issues? It's hard to say, but after considering these problems, at least you will get a direction.
first, we should consider the development stage of the enterprise and the stage of the capital market.
If the enterprise has been listed, it is appropriate to use stock options or restricted stocks for equity incentives. In the early days, stocks were usually distributed directly to the team. At this time, the distribution must be cautious, because if it is separated, it will not be recovered. The company's early development and changes will be greater, and the entrepreneurial team members will go in and out frequently. Once the equity is given, it will be more troublesome for people to leave. What to do with those who come later needs careful consideration.
second, it depends on whether the company is qualified to engage in equity incentives.
In this regard, the New Third Board has no regulations on listed companies, so we should refer to the regulations of the CSRC on listed companies at this time. Specifically, if there are negative opinions in the audit report of listed companies in the last year, or they cannot express their opinions, or they are punished by the CSRC in the last year, the company cannot engage in equity incentives. Therefore, the company must pay attention to the fact that the audit report should not be patched and should try to avoid being punished.
third, we should consider whether the object of equity incentive is qualified.
At present, there is no regulation in this respect in the New Third Board, but the regulation for listed companies is that directors, supervisors, senior managers, core technical business personnel and other employees that the company thinks should be encouraged can get equity incentives, but independent directors should not be included. Companies listed on the New Third Board can refer to the design of the new third board for additional issuance, that is, to implement equity incentives for directors, supervisors, senior managers and core personnel.
in principle, shareholders or actual controllers can't be the object of incentives, because equity incentives are intended to make the interests of employees and major shareholders tend to be consistent. If the actual controllers are encouraged, it will lose its due significance.
fourth, we should consider whether to use options or stocks to stimulate.
before an enterprise belongs to a limited liability company or is listed, it can be directly motivated by stocks. Especially when the company didn't introduce PE, there was no market price for shares, so it didn't need to be paid by shares. At that time, it wasn't a public company, and it didn't need the supervision of accountants. Usually, shares can be directly used as equity incentives, or they can be held by proxy.
fifth, we should consider the number and reservation of equity incentives.
For this problem, the relevant regulations for listed companies make it very clear: the total number of equity incentives cannot exceed 11% of the company's total share capital, and the single incentive object cannot exceed 1% of the total share capital. Generally speaking, listed companies are relatively large, and the amount of 11% shares is very large. Generally speaking, there are very few equity incentive plans of listed companies that exceed 5%. This involves a balance problem. The more incentive shares are issued, the more share payments will be made, which will have a great impact on the company's profits and the earnings per share (EPS) will drop sharply.
sixth, we should consider whether to let employees hold shares directly or through the shareholding platform.
At present, the shareholding platforms of the companies listed on the New Third Board cannot participate in the fixed increase (see Lecture 8 "Learning and Discussion on the New Regulations of the Shareholding Platform" for details), and the shareholding platforms of employees cannot participate in the fixed increase, so it is not feasible for the shareholding platform to participate in the fixed increase design. Of course, some people in the market are calling for the policy of employee stock ownership platform to be lenient.
Seventh, we should consider the source and realization of stocks.
There is no regulation on the source of shares in the New Third Board. The source of shares in the New Third Board is nothing more than issuance or transfer.
Eighth, the pricing and lock-up period of equity incentives.
equity incentive is for incentive, and the person who takes the incentive will benefit. If the stock has a fair price now, intuitively speaking, the stock price of equity incentive is to make a discount on the fair price, which is the logic of restricted stock. If the stock is 11 yuan now, I will give you a 51% discount and let you buy it for 5 yuan, and this difference is the incentive. The price of restricted stocks used by listed companies for equity incentive is clearly stipulated, that is, the closing price of the first 1 trading days or the average closing price of the first 21 days (61,121, which is optional in the new regulations in brackets) is higher, and then the maximum discount is 51%. According to the new regulations, you can also set prices in other ways, but issuers and brokers should make special explanations on rationality.
Ninth, the difference between employee stock ownership plan and equity incentive.
What is the difference between equity incentive and employee stock ownership plan? The equity incentive and employee stock ownership plan we are talking about here refer to narrow concepts, which correspond to the provisions of the Administrative Measures for Equity Incentive of Listed Companies and the Guiding Opinions on the Pilot Implementation of Employee Stock Ownership Plan of Listed Companies issued by the CSRC.
tenth, the tax issue. Equity incentives must eventually cash in equity income, and equity income will definitely involve tax payment.
Therefore, when we design equity incentive, we must consider the tax issue of the incentive object. 1. Personal income tax. 2. The tax rate of limited partnership enterprises. 3. The tax rate of limited companies.
eleventh, performance setting.
the core purpose of equity incentive is to bind the interests of employees and controlling shareholders or major shareholders together, so as to realize the binding of company performance and individual performance, otherwise equity incentive will deviate from its original intention. Therefore, one of the signs of the effectiveness of equity incentives is to see whether there are performance settings.
twelfth, does the equity incentive plan require administrative permission?
according to the company law, the equity incentive is approved by the company's shareholders' meeting or the shareholders' general meeting. At present, the listed company's equity incentive and employee stock ownership plan do not need the approval of the CSRC. At present, there are no specific guidelines for the equity incentive and employee stock ownership plan of the New Third Board. After the board of directors announces the equity incentive and employee stock ownership plan and issues a notice of convening a shareholders' meeting, the share transfer will now review the plan afterwards. If the share transfer deems it necessary, it will issue an inquiry. During the period of answering the inquiry, the process of convening the shareholders' meeting should be suspended, and the notice of the shareholders' meeting can only be issued after the share transfer is satisfied with the inquiry and the issuance plan is revised.
thirteenth, the matters needing attention in the design of equity incentive scheme under the current system of the New Third Board.
In the case that the detailed rules for equity incentive of the New Third Board have not been promulgated, the following issues should be considered before implementing equity incentive:
1. Will the option scheme work?
2. Can repurchase be operated?
3. How to hold shares.