What is the purpose of encouragement?

Incentive policies aimed at mobilizing people's enthusiasm have become the basic approach and important means of human resource development and management. The employee stock ownership plan is just such a new incentive method.

Employee stock ownership plans in Asia

The employee stock ownership plan is a benefit-sharing mechanism that enables employees to claim the right to residual value by holding stocks in order to attract, retain, and motivate employees. and a participation mechanism with operational decision-making power. It is a special compensation plan and a form of corporate incentive mechanism. The purpose of implementing an employee stock ownership plan is to make employees become shareholders of the company. Of course, the implementation of an employee stock ownership plan is a voluntary act. Company owners voluntarily and plannedly transfer part of the ownership and future income rights of the company to employees, and employees also voluntarily subscribe for or receive equity in the company.

Employee stock ownership plans have been popular in the United States since the early 1990s and have spread rapidly in Europe in the past few years. But until recently, Asia had not embarked on such a plan. This approach has not been able to spread in Asia due to inherent problems in Asian corporate culture, such as reluctance to dilute company ownership, strict hierarchical management, and disrespect for minority shareholder ownership.

Recently, things have begun to change. As Asian companies compete with multinationals in international markets, they are finding the need to offer multinational-style compensation packages. To retain employees in an increasingly tight labor market, mainstream companies have to compete on salaries and perks. A revolution is quietly spreading across Asia's corporate world. Shares once tightly held by families or state-connected interests are now looking to broaden their shareholder base. Some companies not only seek out international institutions and domestic retail investors, but also allow their employees to become shareholders of the company through employee stock ownership plans. Although the development of employee stock ownership plans in Asia is still in its early stages, the number is increasing rapidly. In India, which is known as the most developed employee stock ownership plan, petrochemical and textile group Reliance Industries launched a stock ownership plan covering 20,000 employees; HDTE Bank distributed 5% of publicly issued but unsold shares to employees. Elsewhere in Asia, banks such as Development Bank of Singapore and Singapore Airlines have recently introduced equity packages to all employees, while Korean conglomerates such as Hyundai and Samsung have begun to broaden the concept of share ownership. In Thailand, old economy strongmen Siam Cement and Siam Commercial Bank are planning to launch their own employee stock ownership schemes.

Many companies in Asia are still owned and run by family interests, who are often reluctant to hand over their tight control over management or dilute their ownership. But companies run by second-generation Western-educated members of their families are more respectful of the concept of offering stock-based compensation to employees. While they remain a minority for the time being, the entire situation will change once the shares are granted and become stock-holding employees. While management is hostile to greater transparency and business owners are reluctant to dilute ownership, the performance benefits of employee equity programs are too great to ignore.

The practice of employee stock ownership plans in my country

Employee stock ownership plans are becoming increasingly popular in my country. The China Securities Regulatory Commission is drafting regulations to allow China's large state-owned enterprises to introduce ESOPs to improve corporate management. Many companies in China are also drafting their own employee stock ownership plans. Let’s take a look at what Lenovo and Xiamen Golden Dragon are doing.

Lenovo recently announced its large-scale employee stock ownership plan. The fundamental reason is to attract more talents. Hong Kong-listed Lenovo launched an equity package 18 months ago in a bid to recruit and retain the talent needed to sustain its impressive growth rate. Only white-collar employees and supervisors who have been with the company for at least two years are eligible for equity in the company. It is difficult to quantify the expected effects of adopting this approach, but it cannot be denied that this approach will be a key factor in convincing talent to join the company. Currently, about 2,000 of Lenovo's 10,000 employees are eligible for stock options. Employees must hold all stock options for at least one year, with 20% exercisable every year thereafter. Of course, if the stock price remains flat or falling, employees get no benefit from the package. In reality, however, the stock price is doing well because the program plays an important role in motivating employees to maintain high growth rates. Like many other companies around the world, Lenovo implemented equity plans primarily to compete with new Internet companies for talent. Internet companies don't have enough cash to invest in salaries, but they have a lot of stocks that are used as currency, so they have been generous in providing stock options to employees.

After the turmoil in technology stocks in April, Internet companies' compensation packages now appear less rich than in previous months, but they have played an important role in establishing equity packages. Now, companies are discovering that expanding employee stock ownership has other benefits. Before the implementation of the stock option plan, almost no employees cared about the company's stock price performance, but now nearly a quarter of employees care about the stock performance. Therefore, company executives believe that the stock option plan is an excellent way to balance the interests of shareholders and employees. The example of Lenovo is a successful case of the implementation of employee stock ownership plan in my country.

However, on the contrary, Xiamen Jinlong has struggled to implement its employee stock ownership plan. King Long United Automotive Industry Co., Ltd., commonly known as "Big King Long" Since the sudden resignation of the former general manager, more than 1,800 employees have been in panic. Even the directors of the company's board of directors don't know what to do. In order to prevent this "luxury bus" from overturning and to protect their own rights and interests, the employees spontaneously launched a self-rescue operation without a leader for more than half a year, hoping to make decisions about themselves and the company through employee stock ownership. fate. But employees, management and the board were deeply divided over the issue of employee stock ownership. Employees and management are adamant about holding shares. The management believes that employee stock ownership can enhance the cohesion of the enterprise, stabilize the backbone class, and accelerate the development of the enterprise. It is one of the main ways of restructuring state-owned enterprises. From the perspective of the company's development, the current momentum is very good, but there are some financial problems? Employee stock ownership has enhanced the company's capital strength, reduced operating costs, and is conducive to the company's future development? From the perspective of diversification of property rights entities, As employees come in, the company's equity structure has changed. Under the supervision of employees, the management's decision-making will be more scientific and accurate. Especially with the change in the composition of the board of directors, the company's property rights will be clearer, and the rights and responsibilities will be clearer. , government and enterprises can be separated, and management can be more scientific. But some members of the board expressed dissatisfaction that employee stock ownership would change their shareholding ratio, so they insisted on opposing it. At present, there is still no satisfactory coordination result.

How can employee stock ownership plans be more reliable?

The employee stock ownership plan is a new incentive plan, and it also has some shortcomings and difficulties. 1 If the correlation between stock price and company performance or intrinsic value is not high, then stock option incentives lose their theoretical basis.

The basic assumption of implementing an employee stock ownership plan is that there is a high correlation between the company's performance or the company's intrinsic value and the company's stock price, and the stock price level can reflect the work performance of the company's employees. But whether this premise can be established is a question. In listed companies, stock price = earnings per share × price-earnings ratio? Or price-earnings ratio = stock market price / earnings per share. The correlation between corporate performance and stock price can be observed through the price-to-earnings ratio. Obviously, the closer the P/E ratios of a stock in different periods are, the higher the correlation between corporate performance and stock price, and vice versa; the closer the P/E ratios of different stocks are in the same period, the greater the general correlation between corporate performance and stock price. The higher the value, the lower the value. Experience tells us that the price-to-earnings ratios of the same stock in different periods and different stocks in the same period have huge differences. In other words, the correlation between stock price and corporate performance is not necessarily high. In fact, this is not surprising. Enterprise performance determines only the intrinsic value of the stock. The stock market price is determined by two factors: the intrinsic value and the supply and demand forces of the stock market. The supply and demand forces of the stock market are also affected by factors such as economic cycles, stock market cycles, psychological expectations, and speculative forces. Influence. Therefore, it is inevitable that the stock market price deviates from its intrinsic value and appears undervalued or overvalued. The problem is not the overvaluation or undervaluation of the stock price itself, but that the employee stock ownership plan uses the market price of the stock instead of the intrinsic value to "tortuously" reflect work performance, which will inevitably lead to "distortion" of employee performance evaluation. , so that employees of companies whose stock prices are higher than their intrinsic value receive excessive rewards, while employees of companies whose stock price is lower than their intrinsic value do not receive the rewards they deserve, because in fact, employees' contributions are only related to the intrinsic value of the stock. .

Because my country's stock market is currently in the early stages of development, with an overly speculative atmosphere and insufficient market supervision experience, the stock prices of listed companies in my country deviate particularly seriously from corporate performance or the true value of the company. Prices of blue-chip stocks cannot rise, and loss-making stocks , The stock prices of junk stocks are often "satellite". The price of blue chip stocks cannot go up. This is not a special case in my country's stock market, but is well known. On the contrary, poor-performing stocks, loss-making stocks, and junk stocks have abnormally high values.

Obviously, such a "confused" stock price makes the employee stock ownership plan completely without basis. In addition to the price of individual stocks, the rise and fall of stock market indexes will also destroy the correlation between corporate performance or corporate value and stock prices: when the market rises sharply, the prices of almost all stocks will rise sharply? When the market falls sharply? , the price of almost all stocks will fall significantly without any change in their performance or value. If a company sets up an employee stock ownership plan when the market is down, employees do not need to improve their performance. As long as they exercise their options when the stock rises in the future, they will definitely get a lot of stock price difference. 2. The conflict of interests and balance issues between the employee stock ownership plan and the original shareholders. The implementation of employee stock ownership plans, no matter what method is adopted, is essentially an adjustment to the original shareholder interest structure. In terms of shareholding ratio, it is an indisputable fact that the shareholding ratio of original shareholders has decreased after the implementation of the employee stock ownership plan. Therefore, if an enterprise wants to implement an employee stock ownership plan, it must pay attention to solving the conflict of interests between the original shareholders and employees and how to balance it. In Western countries, why doesn’t every well-known company implement employee stock ownership plans? Why did employee stock ownership plans begin to develop only after the 1970s? Why are employee stock ownership plans mostly concentrated in the information industry? Why did the employee stock ownership plan initially focus on business operators and then gradually extend to ordinary employees? All are closely related to interest adjustment. Since the employee stock ownership plan involves the adjustment of the vested interests of the original shareholders, there must be sufficient reasons to convince the original shareholders. The role of human capital in enterprises is most obvious in the information industry; physical capital has been Its scarcity is gradually decreasing. Currently, there are 2 trillion hot dollars in the world looking for profit opportunities every day. The value of human capital is first reflected in business operators. Therefore, shareholders first appeared in the information industry in the 1970s. The operator class implements an employee stock ownership plan. Since the employee stock ownership plan involves the recognition of the original shareholders, it is very important to design an appropriate employee stock ownership ratio; and due to the dynamic nature of the employee stock ownership plan, a medium- and long-term goal - equity structure goal must be set. Only in this way can the interests of original shareholders be protected, otherwise the interests of original shareholders may be infinitely diluted. 3. The issue of balancing the interests of employees and the interests of the company. Since the employee stock ownership plan is a compensation plan, it is crucial to ensure the reasonableness of the compensation structure. The employee stock ownership plan is a compensation calculation for employees, but it must be a cost for the company. Therefore, for companies, determining a reasonable discount is the key to employee stock ownership plans. If the discount is too small, the meaning of remuneration cannot be reflected; if the discount is too much, the burden on the enterprise will be too great. Therefore, companies must consider this issue when designing employee stock ownership plans. 4 The scope of application of employee stock ownership plans is too narrow, and the long-term incentive system of most non-listed companies must find another way. Employee stock ownership plans have a lot of buzz, but even if they are implemented in all listed companies, their adaptability to the entire corporate world will be less than 1%. Obviously, it is unrealistic to use employee stock ownership plans alone to solve the incentive problems of all companies.