On June 18, 2009, Sanjin Pharmaceutical issued a letter of intent to offer shares, suspending the IPO restart for nine months. In just one month, the IPO produced 19 billionaires in batches. The tempting myth of making wealth once again evokes people's yearning for equity incentives, and more and more listed companies and non-listed companies are flocking to it.
As an attractive "golden handcuffs", can equity incentives "cuff" the hearts of executives? This is a controversial topic. In 2008, for most investors, it can be said that it was scarred. Inconsistent with it, with the arrival of the climax of "non-size" lifting the ban, the phenomenon of "resignation and cashing out" of listed company executives has intensified. Obviously, the "golden handcuffs" of equity incentive can't "cuff" the hearts of executives. Between the temptation of interests and the development prospect of the company, choosing the former is by no means a case.
Of course, the positive role of equity incentives is still worthy of recognition. In the short seven years from 1999 to 2006, Mengniu successfully interpreted the business legend of "ten times the speed in three years" with the power of "special fund for old cows" in generate, and its sales revenue increased by more than 400 times. Even in non-listed companies, the incentive aura of equity incentive is still brilliant. With the tenacity and passion of the employee-owned company generate, Huawei staged a commendable "hyena legend".
To say that equity incentive is a double-edged sword full of lethality, I am afraid no one will question it, but how to seek advantages and avoid disadvantages will undoubtedly hurt everyone. According to the practical experience of equity incentive scheme, the key to play the positive role of equity incentive and restrain its negative influence lies in grasping the balance between salary planning and corporate governance optimization.
The pain of executive compensation
When it comes to the yearning for equity incentive, people think of its "myth of making wealth". On June 6, 2007, with the successful listing of Alibaba [19.28 -2.23%] in Hong Kong, thousands of employees holding Alibaba shares became millionaires or multimillionaires overnight. For exhausted employees, equity incentives undoubtedly let them find a breakthrough in buying a car and a house; For companies that are eager for talents, equity incentive has undoubtedly become a killer weapon to attract high-quality talents.
In the west, saving Iacocca from Chrysler and reviving Steve from Apple? Jobs created the "business legend" of "single CEO"; When Liang Wengen of Sany Heavy Industry [0.00 0.00%] and Ma Mingzhe of China Ping An [0.00 0.00%] tried to interpret the "China Legend" of "one-dollar CEO" or even "zero-dollar CEO", they were not greeted by flowers and applause, but by a heated discussion on executive compensation.
From the perspective of personal value determination of executives, although we have many scientific tools to evaluate the post value or human capital value, the evaluation results are actually difficult to objectively reflect the real value of this special group of executives. It is precisely for this reason that neither the western version of the "salary limit order" nor the China version of the "salary limit order" can fundamentally solve the headache of executive compensation.
On the other hand, from the perspective of executive compensation structure, there is almost no difference between "one million annual salary" and "one yuan annual salary", because the executive's salary depends on the value of the equity or option he owns. According to the Associated Press's incomplete statistics on CEO's salary of the world's top 500 companies in 2007, the salary only accounts for 9.5% of their total salary.
Therefore, along the idea of "regulating static quantity", it is impossible to find the secret to solve the "executive compensation problem". The way out is to make a fuss about the executive compensation structure and launch equity incentives in due course. Of course, the key links such as the qualification confirmation of incentive objects and the choice of incentive methods should also be carefully planned.
In the United States, equity incentive can be said to be a kind of welfare for employees, and the plan of full shareholding is very popular, but for enterprises and employees in China, equity incentive is still a "scarce product". If it is made into a welfare for all employees, the equity incentive will easily deteriorate and become a funnel for the loss of enterprise assets, resulting in the loss of enterprise control.
In order to resist the risk of equity incentive within a limited scope, employees should seriously consider the added value of human capital, irreplaceable degree, historical contribution and professional quality when confirming their incentive qualifications. Focusing on the future is the purpose of equity incentive, so the incentive share should be tilted to those employees with high added value and difficult to replace; At the same time, in order to avoid the bad phenomena such as "quitting and cashing in" and "sharing stolen goods in disguise", it is also essential to review the historical performance and professionalism of employees.
Speaking of incentive mode, from the perspective of boosting the business performance of enterprises, the incentive mode of differential equity is very effective for enterprises in the initial stage (or high growth stage). It can be said that among the many forces that gave birth to Silicon Valley in the United States, stock options as an incentive method can be said to be indispensable. It is also based on the incentive effect of stock options that the myth of Microsoft's rise came into being.
In our country, the key reason why equity incentive is regarded as a double-edged sword is that the performance conditions of exercise are too low or the exit mechanism is not rigorous enough. From the perspective of salary planning, equity incentive should not be a "zero-sum game" between the existing corporate wealth and stock market wealth, but should be a "wealth-creating" tool to enhance the overall value of enterprises and the value of individual human capital.
Balanced Incentive and Corporate Governance
Equity incentive is different from monthly salary, business commission and year-end bonus, not only because of the long-term geometric growth of equity incentive, but also because of its influence on corporate governance structure. Therefore, in addition to the planning of incentive intensity and incentive mode, we must also deal with the controlling stake in equity incentive. This is more important for non-listed companies (especially family businesses) without clear legal restrictions.
From the standpoint of "economic man's utility", the major shareholder of a company pursues shareholder value, while the manager pursues the value of his own salary and the appreciation of human capital. Equity incentive is an effective tool to unify the manager's personal income with the interests of the majority of shareholders. However, if the equity incentive is divorced from the effective constraint of corporate governance, the management without supervision will use the method of "compressing" first and then "releasing" to hollow out the company's profits. Therefore, it is very necessary to establish a perfect corporate governance structure.
In addition, improving the level of governance is also of great benefit to corporate financing. According to a survey by McKinsey & Company, under similar financial conditions, investors are willing to pay a premium of 20%-27% for well-governed Asian companies and 65,438+04% for well-governed North American companies.
For listed companies, there are relevant laws and regulations for reference on how to standardize corporate governance. As for the measures put in place, it can be expounded from two levels. From the inside of the enterprise, it is mainly from the formulation of laws and regulations and the construction of company system to further restrain the decision-making behavior of management, standardize and straighten out the relationship between shareholders' meeting, board of directors and board of supervisors, and strictly control the key links such as the granting and exercise of options, stock unlocking and withdrawal mechanism; From the outside of the enterprise, it is mainly to further improve the capital market, the company control market and the manager market.
For unlisted companies (especially limited liability companies), the relationship between equity incentive and corporate governance is complicated. Non-listed companies want to achieve the balance between equity incentives and corporate governance, the key lies in the "autonomy" of enterprises, which can be started from the following two aspects:
On the one hand, improve the authorization system on the basis of selecting the incentive object. Generally speaking, the power of growing enterprises is highly concentrated. It stands to reason that this highly centralized governance mechanism should have helped to improve work efficiency, but it is not the case. The reason is that with the expansion of business scope and in-depth development of business, hands-on bosses will feel more and more overwhelmed. This will inevitably lead to many things waiting in line for decision. In the absence of equity incentives, executives are only paid workers, and the company's operating performance is not closely related to its personal gains and losses, and no one is really willing to take the initiative to take responsibility. From the boss's point of view, the introduction of equity incentive provides him with a reference to determine who he can rely on, and solves the problem of "wanting to authorize" but "dare not authorize".
On the other hand, on the basis of improving the governance structure, improve the decision-making process. For most private enterprises, the shareholders' meeting, board of directors, board of supervisors and other institutions can be described as blank or ineffective. In the case of "family decision-making", it is difficult to obtain advanced management ideas and management models, and the resulting criticisms such as chaotic decision-making and lack of internal control can easily drive enterprises astray. Of course, in the modern society where business opportunities are fleeting, too democratic decision-making methods are not conducive to the development of growth enterprises. Therefore, for non-critical equity incentive objects, it is advisable to adopt the form of virtual shares, which only "grant benefits" but not "authorize" to avoid the tragedy of control disputes.
In short, in order to become an incentive tool to fundamentally solve the principal-agent problem and avoid its negative effects, it is necessary to carefully plan the salary system and establish a governance structure that matches the development stage and management theme of the enterprise.