As a way of enterprise managers' equity incentive, stock option has been paid more and more attention by enterprises in China, and it has been put into practice, but there are also various problems in practice. As the stock option system is introduced from the west, its implementation environment is different from that of China. This requires us to have a comprehensive understanding of the stock option system itself and the problems that may be encountered in its application in China. In this book, we will systematically introduce the main problems involved in the stock option system. The first chapter expounds the theoretical basis of manager's equity incentive through the analysis of company theory and modern company incentive system, and compares various equity incentive methods, which provides theoretical solutions and methods for establishing manager's equity incentive mechanism in China. The third chapter introduces several design schemes of stock option system, the experience of foreign stock option system, and analyzes the problems and solutions in the process of implementing stock option system in China. The fourth chapter is some cases of implementing stock option system in various places.
(1) What is stock option?
1. Various definitions of stock options
In recent years, European and American countries have shown a remarkable feature in encouraging operators, that is, more and more enterprises adopt the "stock option" method. The so-called "stock option" means that the enterprise gives the operator the right to buy a certain number of shares of the enterprise at a fixed price within a specified time. Enterprise managers can buy enterprise stocks at a predetermined price at any time within the specified time and sell them at the price they think fit. The biggest function of "stock option" is to encourage operators according to the development results of enterprises, which is "long-term", so that the personal interests of operators can be more closely combined with the long-term development of enterprises, and the business behavior of operators can be extended.
Option originally belongs to a special term in the field of economics. The Dictionary of Economic Encyclopedia says: "Option is the right to buy or sell a certain amount of a certain financial asset or commodity on a certain date at the price agreed by the buyer and the seller." In the Dictionary of Modern Economics edited by david pierce, the definition of option is: "Option, a contract that allows the other party to buy or sell goods or securities at an agreed price within a given period. It is equivalent to a kind of speculation. If the price changes significantly, the buyer may buy it at an agreed price completely lower than the current transaction price. If the difference is greater than the cost of the option, he will benefit. The sales contract is a put option, the purchase contract is a call option, and the sales contract is a double option. These are often called restricted sales and restricted purchases. "
For the stock right system, Ms. Margaret Blair, an expert on the organizational structure of American enterprises and a senior researcher at Brookings Research Center, gave a vivid explanation. She said: "The stock option system can also be called stock option. Its basic meaning is to buy a stock in a certain period in the future at a pre-agreed share price-usually, this stock should appreciate. For example, the company's shareholders promised the company manager that he could use the company's share price this year (for example, $5) to buy a certain number of shares in three years. By then, the price per share may have risen to $20. The advantage of this is that there is great pressure and temptation for business operators to improve their operations and increase profits. Only by innovating hard can he greatly improve the value of the company's stock and enhance the company's productivity, and his personal income is also realized through stock options. "She added:" As far as I know, there is not much difference in the number of existing shares held by ordinary employees and senior managers in American companies that implement employee stock ownership plans. An important incentive mechanism for managers is stock options. The number of stock options promised to major operators is generally large, but there are also clear stock appreciation targets. Usually, you have the right to buy at a low price only if you reach the value-added goal. If you don't reach the value-added goal, you lose this option. From the operational level, stock options are only an expectation, and do not require "cash payment" by enterprises or operators. Therefore, it is a more convenient incentive method, and there are practical considerations in the United States: through the arrangement of options, tax troubles can be avoided.
It can be seen that stock option is a right given to senior managers by the company. The senior managers who hold this right can purchase the shares of the company at the exercise price of stock options within the prescribed time limit. This buying process is called exercise. Before exercising, the stock option holder has no cash income; After the exercise, the personal income is the difference between the exercise price and the market price on the exercise date. The senior management can sell the shares obtained from the exercise at any time according to their own judgment.
To sum up, the so-called stock option is actually an option, that is, the right to buy (or sell) a certain number of stocks at a certain current cost e at an agreed price in the future. This right can be exercised or waived in the future, thus reducing the market risk that may be brought by directly owning stocks at present. The value of the stock expiration date is: V=max(S-X, 0), where s is the stock market price of the option expiration date and x is the stock agreement price when the option is bought. The buyer has the right, but not the obligation, to purchase the option at the cost e, and its potential benefit is to limit the infinite loss, and the maximum loss does not exceed the option fee e.
2. The differences and connections between the stock option system and other incentive mechanisms.
At present, people's understanding of operator's equity incentive is confusing, and stock option system is confused with operator's equity. Under the condition of market economy, the main forms of operator's equity incentive are operator's shareholding, futures stock and stock option.
There are two kinds of managers' shareholding: generalized shareholding refers to the right of managers to hold or buy shares in enterprises in various forms; In a narrow sense, shareholding means that the operator buys a certain number of shares in the enterprise at the price agreed with the asset owner, and enjoys all the rights of the shares, and the stock proceeds can be fully cashed in the current year. The following economic shareholding refers to narrow shareholding.
The characteristics of the operator's shareholding: first, the operator should invest in the purchase, which can be cash or low-interest or discount loans; Second, the operator enjoys various rights of holding shares, such as dividends, voting, trading, transfer, realization and inheritance. Third, stock returns can be cashed in a short time; Fourth, there are risks. Once the operation fails, its investment will be damaged.
The advantage of holding shares is that operators pay for stocks themselves, and personal interests are closely linked to the quality of enterprise management, which is conducive to mobilizing the enthusiasm of operators and promoting the development of enterprises.
The disadvantages of holding shares are also obvious: first, in order to increase dividends and recover investment as soon as possible, operators may pay too much attention to short-term interests and aggravate their short-term behavior. Second, the shares held by operators enjoy various rights. If the shareholding ratio is too large, it will deviate from the principle of management right and ownership sharing to a certain extent. Third, in order to increase profits and expand dividends, operators may take actions at the expense of employees' interests (such as reducing employees' wages) to ensure personal investment income.
Stock refers to that the investor and the operator of an enterprise negotiate to determine the stock price, and the operator obtains an appropriate proportion of the shares of the enterprise in various ways (individual contribution, loan, incentive part conversion, etc.) during his term of office. Before cashing, futures stocks only have some rights such as dividends, and stock returns will be cashed in for a long time as an incentive.
Incentive methods for cashing in futures stocks.
The characteristics of futures stocks are as follows: first, there are various sources of stocks, which can be purchased by individuals, obtained by loans, or converted from deferred payment (or special incentives) of annual salary income. Second, the stock returns can be cashed in for a long time, which can be cashed in one time after the expiration of the term of office or several years after the expiration of the term of office, or can be cashed in a certain proportion or accelerated proportion every year.
The biggest advantage of futures stocks is that it is difficult for managers to realize stock returns in a short time. The appreciation of stock is closely related to the appreciation of enterprise assets and the improvement of efficiency, which urges managers to pay more attention to the long-term development and long-term interests of enterprises, thus solving the short-term behavior of managers to some extent. The new incentive model of annual salary plus futures shares is increasingly recognized by many enterprises, and gradually becomes an effective measure to implement long-term incentives for operators after the annual salary system. The second advantage of futures stocks is that the stock returns of operators will be long-term, so the interests of operators will be gradual and dispersed. To some extent, it overcomes the contradiction that the income gap between operators and employees is too large due to one-time reward, which is conducive to stability. The third advantage is that it can effectively solve the financing problem of stock purchase by operators. Due to the long-term implementation of the low wage policy in state-owned enterprises, the overall income level of operators is not high, and operators are a little reluctant to spend a lot of money to buy stocks at once. The diversification of the acquisition methods of futures shares enables operators to own shares without paying too much share purchase fees at one time, thus realizing the original intention of encouraging operators to work harder today with the shares and income that can be obtained in the future.
In reality, people often confuse futures with options. In fact, there is a big difference between the two. First, futures are purchases in the current period (when the contract is signed or at the beginning of the term), and stock rights and interests will be realized in the future; Option is a future purchase, and the time of purchase is also the time of realizing rights and interests. Second, futures stocks can be purchased by capital contribution, and can also be obtained by means of rewards and gifts; When exercising, the option must be purchased at the capital contribution. Third, after the operator is awarded the futures stock, the individual has paid a certain amount, and the stock cannot be transferred and realized before it expires, so the futures stock has both incentive and restraint functions; But the operator only gets a right after being granted the option and has no money to pay. If the stock price falls during the exercise, the operator only needs to give up the exercise and his personal interests will not be harmed. Therefore, the options only focus on incentives and lack constraints. Similarly, the concepts of executive stock ownership and stock option system are not exactly the same. Broadly speaking, managers' stock ownership includes stock options, but in a narrow sense, managers and stock options are completely different ways of equity incentive.