Common models of equity incentives:

Equity incentive models

1. Stocks,

Options are based on part of the down payment and installments of the incentive objects. An equity incentive method in which one owns the shares of the enterprise after repaying the loan. The prerequisite for its implementation is that the incentive target must purchase the corresponding shares of the enterprise.

Implementation method: The enterprise lends money to the incentive objects as their share investment, and the incentive objects have ownership, voting rights and dividend rights. The ownership is virtual, and the loan for purchasing future shares must be paid off before the loan can be actually owned; the voting rights and dividend rights are real, but the dividend must be paid back according to the agreement.

Advantages:

1. The appreciation of stocks is closely connected with the appreciation and benefits of corporate assets, prompting incentive recipients to pay more attention to the long-term development and long-term interests of the enterprise;

2. Effectively solve the financing problem of incentive targets to purchase stocks;

3. Overcome the income gap contradiction caused by one-time heavy rewards.

Disadvantages:

1. If the company is not managed well, the incentive recipients may lose money, which reduces the incentive recipients’ interest in future stocks;

2. It is difficult to realize the benefits of incentive objects in the short term.

Applicable enterprises:

1. Restructured state-owned holding enterprises;

2. Wholly state-owned enterprises.

Equity incentive model

2. Stock options,

Stock options are a more commonly used equity incentive model, also known as warrants, which refer to the incentive objects granted by the company. A right under which incentive objects can purchase a certain number of tradable shares of the company (exercise) at a predetermined price (exercise price) within a specified period of time (exercise period).

Implementation method: The company issues option certificates to the incentive objects, promising that the incentive objects will purchase equity at a lower price within a certain period of time or when certain conditions are met (such as when the company is listed).

Advantages:

1. Stock options are only a right but not an obligation. The holder can give up the right when the stock price is lower than the exercise price, so it is beneficial to the holder. There is no risk.

2. Since stock options need to be realized when a certain time or condition is reached, the incentive object is to promote the conditions to be met, or to obtain price difference income in order to make the stock appreciate, and will inevitably try its best to improve the company's performance and make the company The stock value continues to rise, which has a long-term incentive effect.

3. It can improve investor confidence.

Disadvantages:

1. There is a time and quantity limit on the exercise of options;

2. Cash is required for incentive objects to exercise their options;

3 , there is a risk that the incentive targets will use illegal means to raise the stock price for their own interests;

4. The wage gap within the company is widening.

Applicable companies: listed companies and companies controlled by listed companies.

Equity incentive model three, performance stocks,

Implementation method: Determine a more reasonable performance indicator at the beginning. If the incentive object reaches the predetermined target by the predetermined period, the company will grant it A certain number of shares or a certain incentive offered to purchase shares of the company.

Advantages:

1. For incentive recipients, there is a close connection between work performance and incentives received, and incentives only depend on work performance and do not involve uncontrollable factors such as stock market risks. factor.

2. For shareholders, there are clear performance target constraints for the incentive objects, and the symmetry of rights, responsibilities and interests is strong, which can form a win-win situation for both parties.

3. For companies, performance stock incentives are less restrictive. Generally, they only need to be approved by shareholders. They are highly operable and low-cost.

Disadvantages:

1. Not suitable for start-up companies, mainly for companies with stable performance, sustained growth and abundant cash flow;

2. It is difficult to guarantee the scientific nature of performance targets;

3. There is a risk that incentive targets may deceive in order to obtain performance;

4. Incentive targets are restricted from selling stocks.

Applicable enterprises: listed companies with stable performance and their group companies and subsidiaries.

Equity Incentive Model 4: Book Value Appreciation Rights,

Book value appreciation rights refer to directly motivating incentive targets with the added value of net assets per share. It is not a stock in the true sense, so the incentive objects do not have ownership, voting rights and allotment rights.

Implementation method:

1. Purchase type: The incentive objects purchase a certain amount of company equity according to the actual value of the equity at the beginning of the period, and sell it back to the company at the actual value at the end of the period.

2. Virtuality: The incentive objects do not need funds at the beginning of the period. The company grants a certain number of nominal shares. At the end of the period, the income of the incentive objects is calculated according to the increment of the company's net assets per share and the number of nominal equity shares. , and pay cash.

Advantages:

1. The incentive effect is not affected by the stock price;

2. No cash expenditure is required for the incentive objects;

3. Method The operation is simple and only requires approval by the company's shareholders meeting.

Disadvantages: The increase in net assets per share is limited and it is difficult to have a large incentive effect.

Applicable companies: listed or unlisted companies with ample cash flow and stable stock prices.

Equity Incentive Model 5. Employee Stock Ownership Plan (ESOP),

refers to an equity incentive method in which individual employees within the company contribute capital to subscribe for part of the company's shares and entrust the company with centralized management.

Implementation method:

1. Use part of the tax-free profits planned through the trust fund organization to repurchase the equity in the hands of shareholders and distribute it to employees.

2. The company establishes an employee trust fund organization (such as an employee stock ownership association) to purchase shareholder equity and sell it to employees in accordance with the employee stock ownership plan.

Advantages:

1. Employee shareholding helps employees have full say and supervision rights over corporate operations, pay more attention to the development of the company, enhance corporate cohesion and competitiveness, and mobilize Employee motivation; 2. Employees bear certain investment risks, which helps to stimulate employees' risk awareness;

3. It can resist hostile takeovers.

Disadvantages: 1. Employees may need to pay cash or bear loans;

2. Equity held by employees cannot be transferred, traded, or inherited;

3. Welfare Stronger and less motivating;

4. Equalization will reduce employee enthusiasm;

5. Lack of legal basis and policy guidance in operation.

Applicable companies: Companies with mature industries and stable growth.

Equity Incentive Model 6. Virtual Stock,

Virtual stock means that the company grants a virtual stock to the incentive object, and the incentive object can enjoy the dividend rights and stock price appreciation income accordingly, but there is no Ownership and voting rights cannot be transferred or sold, and will automatically expire when leaving the enterprise.

Implementation method: The enterprise signs a contract with the incentive objects, agrees on the grant quantity, exercise time and conditions, clarifies the rights and obligations of both parties, and provides dividends on an annual basis. When a certain time and conditions are met, the virtual stocks can be converted into real stocks, and the incentive objects can truly take ownership.

Advantages:

1. Does not affect the company’s total capital and ownership structure;

2. Avoids abnormal fluctuations in the company’s stock price due to variables;< /p>

3. The operation is simple and can be approved by the shareholders’ meeting.

Disadvantages:

1. Large cash expenditures when cashing out incentives;

2. It is difficult to determine the price when exercising and selling.

Applicable companies: listed or unlisted companies with abundant cash flow.

Equity Incentive Model 7. Stock Appreciation Rights,

Stock appreciation rights refer to a right granted by the company to the incentive objects. If the company's stock price rises, the incentive objects can obtain corresponding benefits by exercising the rights. Amount of equity appreciation income, incentive objects do not have to pay cash for the exercise of options, and can receive corresponding cash or equivalent company stocks after exercise.

Implementation method: The company designates a specified number of stocks to the incentive objects as the objects of stock appreciation rights. If the company's stock price rises during the exercise period, the incentive objects can choose to cash in the rights and obtain the benefits brought by the appreciation of the stock price. You can choose to receive cash or exchange it for a corresponding amount of shares.

Advantages:

1. The incentive objects do not own the stock, nor do they have voting rights or allotment rights;

2. The exercise period generally exceeds the term, so It can constrain the short-term behavior of incentive objects;

3. No cash expenditure is required for incentive objects;

4. The operation is simple and only requires approval by the shareholders' meeting.

Disadvantages:

1. The weak efficiency of the capital market means that the stock price has little correlation with the performance of the incentive objects, and there is not much incentive for the performance objects;

2. The company is under great cash pressure.

Applicable companies: listed or unlisted companies with abundant cash flow and stable stock prices.

Equity incentive model 8. Restricted stock plan,

Implementation method: The company grants incentive objects a certain number of the company's stocks according to predetermined conditions, but the incentive objects are not allowed to dispose of the stocks at will. , shares can be sold for proceeds only after a specified service period or upon achievement of specific performance goals. Otherwise, the company has the right to take back the restricted shares given for free.

Advantages:

1. The incentive recipients do not need to pay cash;

2. It can encourage the incentive recipients to focus on the company's long-term strategic goals.

Disadvantages:

1. It is difficult to scientifically determine performance targets and stock prices;

2. Cash flow pressure is high;

3 , The incentive objects actually own the stocks and enjoy ownership, and it is difficult for the company to restrain the incentive objects;

4. The incentive objects have shareholder rights.

Applicable companies:

1. Listed companies with poor performance;

2. Listed companies in the process of industrial adjustment;

3. Enterprises in the start-up stage.

Equity incentive model 9. Management buyout (MBO)

Management buyout, also known as "management financing acquisition", refers to the company's management using capital raised from loans to purchase the company equity, thereby changing the company's owner structure, control structure and asset structure, realizing shareholding operations, and realizing the complete unity of incentives with the interests of the company and shareholders.

Implementation method: The company management and employees *** jointly invest to establish an employee stock ownership meeting, or the company management invests (usually credit financing) to establish a new company as the acquisition subject, one-time or multiple times Acquire the company's equity held by the original shareholders, thereby directly or indirectly becoming the company's controlling shareholder.

Generally, in order to obtain acquisition funds, management will use personal property as collateral to obtain financing from investment companies or investment banks. After the acquisition is successful, they will use the company's equity as collateral instead. If something happens, the investment company will also become a shareholder.

Advantages:

1. Helps reduce managers’ agency costs and promotes long-term and healthy development of enterprises;

2. Helps strengthen management incentives, Enhance the value of human capital and enhance corporate execution;

3. Conducive to corporate internal supervision and restraint on management;

4. Conducive to enhancing investor confidence.

Disadvantages:

1. Difficulty in accurately assessing the company’s value;

2. Difficulty in financing acquisition funds;

3. If not handled properly , acquisition costs will surge.

Applicable enterprises:

1. Enterprises with the withdrawal of state-owned capital;

2. Collective enterprises;

3. Anti-takeover period enterprise.

Equity Incentive Model 10. Deferred Payment

Implementation method: Deferred payment, also called a deferred payment plan, is a package of income plans designed by the company for non-incentive recipients, including some annual bonuses, equity Incentive income, etc. are not distributed in the current year, but are converted into the number of shares based on the company's stock market price on that day, and are deposited into a deferred payment account set up separately by the company. After a certain period, they will be paid in the form of company stocks or in cash based on the market value of the stock at the end of the period. distributed to incentive recipients.

Advantages:

1. Closely linked to the company’s performance;

2. The long lock-in time can avoid short-term behavior of incentive targets;

3. The plan is highly operable.

Disadvantages:

1. The number of shares held by the incentive objects is small, so it is difficult to generate a large incentive;

2. The incentive objects cannot realize their salary in time, and there are risk.

Applicable enterprises: listed companies with stable performance and their group companies and subsidiaries.