Viewpoint... Analysis of the design steps of employee shareholding scheme under the background of mixed reform of state-owned enterprises.
Published:
2020-12-28
The mixed ownership reform of state-owned enterprises is a series of dynamic processes for state-owned enterprises to improve the corporate governance system, enhance market competitiveness, and promote the preservation and appreciation of state-owned assets. As one of the important means of building a diversified equity structure, optimizing corporate governance, and establishing medium and long-term incentives, employee stock ownership has received more and more attention from enterprises in the process of mixed reform of state-owned enterprises.
1. What is Employee Stock Ownership?
Employee stock ownership is a long-term incentive mechanism for employees to enjoy partial ownership of the enterprise and the right to future income by holding shares, and a participation mechanism with the right to make business decisions.
The author believes that employee shareholding has four characteristics:
1. Restrictions of the participants, the participants of the employee stock ownership plan must be on-the-job employees of the enterprise;
2. The wide range of participants, the participation of the employee stock ownership plan should be the majority of employees, that is, not for the general participation of high-paid employees of executives;
3. The particularity of management, the employee stock ownership plan is not a direct employee stock ownership system, but through a third-party entity to exercise equity on behalf of employees;
4. The long-term nature of incentives, the purpose of the employee stock ownership plan is to establish a long-term incentive mechanism for employees, so as to form the consistency of the interests of the enterprise and employees.
The Concept of 2. Employee Stock Ownership and Equity Incentive
In practice, the concepts of employee stock ownership and equity incentive are often confused, but in fact, there are obvious differences between the two, or each has its own emphasis.
The 2014 Guiding Opinions on the Pilot Implementation of Employee Stock Ownership Plans by Listed Companies states, "An employee stock ownership plan is an institutional arrangement whereby a listed company, in accordance with the wishes of its employees, enables its employees to acquire the Company's shares and hold them for a long time through legal means, and the rights and interests of the shares are allocated to its employees as agreed."
The Measures for the Administration of Equity Incentives for Listed Companies, as amended in 2018, states: "Equity incentives referred to in these Measures refer to long-term incentives for directors, senior managers and other employees of listed companies based on the Company's shares."
Broadly speaking, "employee stock ownership" only needs to include two factors-"enterprise employees" and "holding shares of the enterprise", while "equity incentive" needs to add employee categories (directors, executives, core technical personnel, etc.) and incentive requirements on top of the above two factors, thus it can be seen that the broad concept of "employee stock ownership" includes "equity incentive," Employee stock ownership "and" equity incentive "can not only be regarded as parallel or opposite relationship, the two in a certain situation there is a certain intersection, should be a cross relationship.
In a narrow sense, there are indeed many differences between the two in terms of nature, connotation and element composition. It is necessary to carefully distinguish and analyze the different needs of enterprises.
First of all, equity incentive is the way, employee stock ownership is the result.
On the one hand, the implementation of equity incentive will inevitably lead to the result that some employees hold the shares of the enterprise; on the other hand, the existing shareholders of the enterprise agree to implement the employee stock ownership plan, that is, they are willing to share the cake with employees, and also to achieve the incentive effect on directors, executives and core (technical) personnel. Therefore, employee stock ownership is the result of the implementation of equity incentive behavior, in turn, equity incentive is the purpose and means of employee stock ownership plan.
Secondly, the two concepts contain each other, but each has its own focus.
Employee stock ownership emphasizes "holding", that is, through legal means, employees have the opportunity to obtain the company's shares and hold them for a long time, so as to enjoy equal rights and interests with other investors, form a community of interests (self-financing, self-risk), and focus on investment.
Equity incentives emphasize "excitement", that is, using the company's stock as the target, to stimulate directors, executives and other core employees to pay attention to and invest in the company's business performance and future development, focusing on incentives.
The design steps of the 3. employee shareholding scheme.
Structure Design of (I) Target Layer
This stage is mainly to determine the main objectives of medium-and long-term incentive, which belongs to the top-level design stage for enterprises to implement medium-and long-term incentive plans, and then determine the incentive mode to be selected in the next step according to the main objectives. The incentive mode is the core issue of medium-and long-term incentive, which determines how the incentive objects hold equity and how to distribute profits, the incentive model directly determines the effectiveness of the incentive. For example, for state-owned non-listed companies with high listing orientation in the medium and long term, medium and long-term incentive guarantee strategy can be selected. For enterprises with strong demand for mergers and acquisitions or talents, it is necessary to set up medium and long-term incentive plans to attract talents. When designing medium and long-term incentive plans, we should first clarify the incentive objectives so as to select the appropriate incentive mode.
(II) condition layer structure design
This stage is mainly to determine the selected incentive mode according to the target layer, sort out the conditions that the enterprise must have under the incentive mode according to the policies and laws that have been issued by the country, and all the limiting conditions that must be followed and implemented in the plan design process in the future, and determine whether the incentive mode needs to be further adjusted according to the development status of the enterprise. In addition, the enterprise should also refer to its own status, on the basis of national policies and laws, we should determine the scientific and reasonable incentive and restraint conditions in line with our own development, so as to provide a good foreshadowing for the formulation of the next incentive scheme.
Structure Design of (III) Scheme Layer
The scheme design stage is the core link of the medium-and long-term incentive plan, and it is necessary to confirm all aspects of the information in the incentive plan, including the incentive object, the incentive time period, the incentive amount, the incentive source and the rights of the incentive.
(1) Set the incentive object: the incentive object is the beneficiary of medium-and long-term incentive, the purpose of medium-and long-term incentive is to motivate employees, balance the long-term goals and short-term goals of the enterprise.
(2) Fixed grant amount: This mainly addresses the total amount of medium-and long-term incentives, the amount of medium-and long-term incentives for each beneficiary, etc. How to determine, can be determined according to the actual situation of the company, in general, the incentive amount of each beneficiary is basically determined according to the position and personal value ability.
(3) Fixed grant price: This aspect is mainly related to the equity incentive model, that is, to determine the price corresponding to the unit equity (I. e. 1% equity). Before the employees take shares, the financial audit and asset evaluation of the pilot enterprises shall be carried out in accordance with the relevant provisions, and the share price shall not be lower than the approved or filed net asset value per share; the share price of the employees of the state-controlled listed company shall be determined in accordance with the relevant provisions of securities supervision.
(4) Fixed-term arrangement; With the advancement of the enterprise's business, different grant forms or combinations can be selected at different points in time to start the design of medium-and long-term incentive schemes. However, in terms of generating long-term incentive effects, it is suggested that medium-and long-term incentives should be promoted in stages to ensure that employees' passion for work can continue.
(5) Fixed incentive sources: The design of medium-and long-term incentive sources for non-listed companies should be based on the final incentive carrier and choose different incentive sources.
(IV) Implementation Layer Structure Design
The main purpose is to start the next step of implementation according to the determined incentive plan to ensure the implementation and optimization of the process of each implementation link. It is necessary for all departments of the enterprise to divide the responsibilities and authorities in the responsible plan, and at the same time ensure the smooth implementation of the approval and filing of the incentive plan, democratic procedures, risk assessment, legal compliance and other links. Focus on the following three aspects: the way the incentive object is held, the way the incentive object is withdrawn, and the fiscal and tax issues of medium-and long-term incentives.
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