Most of them are restricted stocks and stock options. The design and audit of equity incentive scheme for private listed companies are relatively simple, while state-owned enterprises are very complicated. If you need a detailed answer, please ask another question for the question.
1. Employee stock option
Stock option generally refers to the right that the company grants employees to buy a certain share of the company's shares at a fixed option price within a certain period of time. Employees with options have the right to sell these shares after a period of time and get the difference between the market price and the exercise price. However, during the contract period, the option is not transferable, nor can it receive dividends.
The stock option model has the following characteristics: firstly, stock option is a right rather than an obligation, that is, the incentive object enjoys complete personal freedom to buy or not to buy, and the company has no right to interfere. As a right, the company gives it away for free, which is actually the "forward price right" of giving stock options. Secondly, when the stock option is exercised, the stock is not obtained for free, and the "exercise price" (predetermined price and conditions) must be paid. The exercise price is a "current price", which is fixed for the incentive object in a certain period of time in the future. Finally, stock options are future-oriented, unpredictable and infinitely malleable.
Advantages:
(1) For the incentive object, the capital precipitation cost of the stock option model is small and the risk is almost zero. Once the stock price falls during the exercise, the individual can give up the exercise with little loss; Once it rises, because the exercise price is predetermined, there is a large profit space.
(2) For listed companies and shareholders, because the option is an option given to the incentive object by the enterprise, it is an uncertain expected income. All the income of the incentive object comes from the premium of the listed company's share price to the grant price, and the listed company does not have any cash expenditure, which does not affect the company's cash flow, thus helping to reduce the incentive cost.
(3) Stock options turn the quality of enterprise assets into an important variable in the operating income function, so that the incentive object, that is, the management of listed companies, is highly consistent with the interests of the company, and the two are closely linked.
Disadvantages:
(1) According to the Accounting Standards-Equity Payment, on each balance sheet date during the waiting period, the services obtained by the incentive object in the current period shall be included in the relevant costs or expenses and capital reserve according to the best estimate of the number of exercisable options and the fair value on the grant date. Therefore, stock options will continue to be included in the corresponding expenses during the waiting period, which will continue to affect the company's profits. In addition, if the number of options with feasible rights cannot be estimated reliably and optimally, it will have an unpredictable impact on the amount of expenses involved, and then affect the company's annual profit. (affecting profits)
(2) For the incentive object, the primary problem is that the term of stock options is generally long and there are many uncertainties in the future. At present, according to the regulations, there is not less than five years from the date of authorization to the end of the exercise period. After that, the management's shareholding reduction is still implemented in accordance with the regulations of the Shenzhen Stock Exchange, that is, the annual shareholding reduction shall not exceed 25% of its shares. Therefore, when the unpredictable fluctuation of the market makes it difficult for the incentive object to make accurate expectations of its own stock returns, this way is to eliminate the expected incentive effect.
2. Restricted stock
Restricted stock refers to a certain number of shares of the company granted to the incentive object by the company according to the predetermined conditions. Incentive objects can only sell restricted stocks and benefit from them if their working years or performance targets meet the conditions stipulated in the equity incentive plan.
Compared with stock options, restricted stocks are characterized by the symmetry of rights and obligations, and there is also some symmetry between incentives and punishments. After the incentive object obtains shares with free funds under the condition of meeting the grant conditions, the rise and fall of the stock price will directly increase or decrease the value of the restricted shares, thus affecting the interests of the incentive object. In addition, restricted stocks can also directly motivate or constrain the incentive objects by setting the unlocking conditions and the provisions on the disposal after they cannot be retrieved.
Advantages:
(1) Restricted stocks have no waiting period. When the equity incentive plan is implemented, the incentive object will get equity, so the incentive object always has an intuitive understanding and judgment of the available incentive value, which has a good incentive effect.
(2) For the enterprise where the incentive plan is located, equity incentive is also a financing method. Although the incentive object is to obtain the company's equity at a lower price, the company's available funds have indeed increased. (3) The equity has been transferred with this incentive plan, so the incentive object generally has the voting right corresponding to the equity.
Disadvantages:
(1) For the incentive object, once the restricted stock incentive method is accepted, the equity must be purchased, so once the equity depreciates, the incentive object needs to bear the corresponding losses. Therefore, the incentive object holds restricted stocks, which actually takes risks.
(2) When obtaining restricted stock incentives, all incentive objects need to invest money on the spot, so there is a certain financial pressure on them.
3. stock appreciation rights
Stock appreciation rights refers to the right granted by listed companies to the incentive object to obtain the benefits brought by the specified number of stock price rises in a certain period of time in the future under the agreed conditions. When the authorized person exercises the right under the agreed conditions, the listed company will pay the authorized person cash according to the difference between the shares in the secondary market on the exercise date and the authorization date multiplied by the number of authorized shares.
As the right of stock capital increase is linked to the market value of the company, it is not applicable to the company to be listed (there is no such thing as the rise and fall of stocks), and at present, it is used less and less frequently in the equity incentive of listed companies, so the following analysis is no longer needed.
Second, the equity incentives of domestic listed companies
According to the statistics of GEM, most companies listed on GEM have carried out equity incentives before listing. However, it often happens that companies preparing for listing improperly handle equity incentives, which affects the overall listing process of the company.
Most GEM companies have only implemented equity incentives once. At present, domestic A-share listed companies are still encouraged by linking their performance with their current shares before listing.
1. The major shareholder transfers shares to the management at a low price.
This way is mainly through the company's shareholders to transfer the original shares to the company's executives and core technicians who need to be motivated at a relatively low price. Generally, the implementation of this method is based on the premise that the above-mentioned senior executives and core technicians have worked in the company for a long time and achieved excellent results, and the controlling shareholder (major shareholder) will retroactively reward the former personnel to reflect the shareholders' recognition of the above-mentioned personnel's operating performance. The disadvantage is that it dilutes the control right of shareholders, and the incentive effect on the future operation of enterprises is not obvious.
2. The management has increased its capital to the company as a new share.
This way is mainly through the consent of the company's shareholders, and the management and core technicians become the company's shareholders through capital increase and share expansion, and share the equity appreciation income after listing. Generally, the price of capital increase and share expansion is basically the same as that of other financial investors and strategic investors, and a certain equity incentive assessment system should be formed within the company. When the business performance and other assessment indicators are qualified, these people who have made significant contributions to the company's development are allowed to become shareholders of the company.
3. Curve equity incentive
This way is different from the way of directly letting management directly increase capital and share, because the price of capital increase and share expansion of management and core technical backbone is different from that of financial investors and strategic investors. Therefore, it may not be necessary to formulate an equity incentive system for the above-mentioned equity incentive plan (as long as it may not need to be directly disclosed), and it is not necessary to ask sponsors, accountants and lawyers to check the effectiveness and legality of the relevant plans and whether the corresponding accounting treatment conforms to the relevant provisions of the Accounting Standards for Business Enterprises, but the above procedures need to be fulfilled in this way.
As can be seen from the above methods, the equity incentive plan of China's A-share listed companies is generally based on the existing shares, focusing on retrospective incentives for enterprise management and core technicians, encouraging enterprise managers to ensure the company's performance growth before listing and successfully achieve the listing goal. After all, only after listing can the equity increase to the maximum. As for retaining the company's talents after listing, the equity incentive plan to encourage the company's management to pay attention to the company's performance is mainly realized through the option incentive plan, restricted stock incentive plan and stock appreciation rights incentive plan implemented after listing.
Third, three kinds of equity incentives are worth exploring
(1) The parent company takes the equity of the subsidiary to be listed as the target.
(2) restricted stock incentive plan before listing
(3) Pre-listing performance is linked to stock incentives.