Employee shareholding PK Equity Incentive: Flexible operation needs "real gold and silver"

Judging from the current employee ownership plan, compared with the standard equity incentive, employee shareholding has obvious advantages in the number of participants, the fallback of large shareholders and the flexibility of operation. However, the standard equity incentive can generally enjoy a certain "preferential" or free "rights", employee stock ownership plan without financing and fallback clause, The incentive is relatively limited, employees need to dig up real gold and silver.

Rong Consulting Chairman Zheng told the Daily economic news reporter that employee shareholding only need board and shareholder meeting approval, the standard equity incentive also need to report approval, "Employees can not enjoy restrictive stock discount discount, nor as options do not pay to enjoy the future price rise of the discount; Employee shareholding can not be counted into the incentive cost of equity, the normative share incentive will involve a cost, each has advantages and disadvantages, it is difficult to generalize. ”

Employee ownership participation is broader

One of the most obvious features of the employee ownership plan is the wider participation. As mentioned above, the total number of people participating in the north is as high as 3000, and the first number of employees involved is about 1000. In addition, the company's employee holdings are based on the company's senior management and other employees who have worked for a year, covering almost all employees, as seen from the Terry plan. Suningyun, the total number of employees participating in the company's employee shareholding program is not more than 1200, and the participants almost include all the important positions of the company.

Overall, the employee stock ownership plan is a general nature, with a broader significance, equity incentives tend to cover only part of the company's employees, more emphasis on incentives. A number of listed companies in the interview, said that the staff shareholding involved in a wider range, but also more favored by employees. However, there are also listed companies in an interview, said, "Most employees have to volunteer for employees, but some employees are more cautious about employee ownership, for them this is a new thing, will be on the sidelines of the shareholding plan, so there may be a high level of participation of senior executives."

Dongdengwen, director of the Institute of Financial Securities, Wuhan University of Science and Technology, said to reporters, "employee shareholding is more common in foreign countries, some as a kind of welfare, that is a kind of general benefits, may be based on the length of service, we all have, generally in accordance with the market price discount, such as playing a 70 percent to employees, in the United States is called employee purchase plan. In the United States there is also a fund called ESOP (company employee Stock ownership plan), is linked to the old-age, esop reach a certain condition of the staff can participate, such as the seniority reached a year, there is the right to participate, some enterprises more generous, a join the company may be able to enjoy, Esop This is to use the company's stock as a retirement savings, to the age of 65 to be eligible to sell the money.

"Employees are most interested in bringing the corporate growth effect to most of the company's employees." It will make more important institutional arrangements in the context of the relevant overseas for example, there are stringent requirements in the most typical ESOP plan for the U.S. Employee ownership plan, with at least 70% employees in the employees ' shareholding program being involved in the program, and only if the rules are in the U.S. legal sense of the employee ownership plan. Zhangxiaoyi, a deputy director of the SSE company, said in the 2014 China listed companies ' staff ownership and equity Incentive Forum.

Lack of flexibility in equity incentive

The daily economic news reporter notes that from companies that have published a draft employee-ownership plan, the majority of the stock of the employee-ownership plan is purchased from the two market, with the exception of large shareholder grants and private offerings. Compared with the equity incentive, the employee stock ownership plan in the market low operation appears more flexible, in the market in a weak city, the equity incentive has repeatedly appeared in the right price is higher than the market price, theoretically, the listed company's equity incentive object can choose to give up the right to do. But if the business is really good, the lower share price is mainly due to systemic decline in the market, which is very unfavorable to the target of equity incentive.

In addition, when the market is high, when the equity incentive reaches the right conditions, although not immediately right, but the current China's listed companies stock options Income tax reference is the right day of the stock closing price, rather than the stock cash when the selling price. The asymmetry of the tax liability and the income of the right of the line will lead to some problems, such as the future price is higher than the right day closing price does not need to pay more tax, but the price is lower than the right day closing price, also can not be refunded.

In addition, the object of equity incentives to withstand the test of stock prices, but also to withstand the test of substandard performance. "Performance standards difficult" also really let a lot of company's equity incentive "wasted", and employee ownership does not exist in this problem. A securities representative of a listed company told reporters, "The staff shareholding operation is more convenient, the board of directors and the general meeting of shareholders can be implemented." This is from the pay system out, the time span can be longer ", and equity incentives have an advance conditions, that performance can be achieved, not the words are actually painting a" cake.

According to the reporter not complete statistics, this year, there are Hang Seng electronics, Huayi Electric, stone information, burning control technology, Zhangzidao Island, Shute, Beijing Express, Zoomlion, East Soil Science and technology, Feida, Royal Bank shares, Avic Electric test, Thousand foot pearl, Nachuan shares and other companies to terminate the equity incentive plan. It is noteworthy that the above 14 companies, only Beijing Express, Zoomlion, Hang Seng Electronics and Huayi Electrical from the motherboard, the rest from the board and the Board of Business.

Employee ownership is not to say not to pay attention to performance, but in the operation appears more flexible. Zheng to the daily economic news reporter said, "Equity incentives to have performance protection, employee ownership does not need performance protection." But if performance declines, employee ownership is likely to lose money because of a fall in share prices, so the fact that employee ownership has to be profitable also implies a demand for performance growth, but not so absolute. For example, equity incentive commitment Performance 100 million, you finish 99 million words also useless, (equity incentive) will be abolished, employee shareholding is not so absolute, there is a certain degree of flexibility.

"Real money" is required for employees to hold stock

There is another important difference between the employee ownership plan and the equity incentive plan. The core of the employee ownership plan is that employees buy shares of their own companies, and the more typical characteristics of an equity incentive plan is the right to acquire a certain stock or buy a stock in the future.

In addition to the listed company executives and some mid-level cadres, the public company's ordinary staff income is actually very limited. In the face of employees ' voluntary participation in the employee ownership plan, the willingness of ordinary employees to participate is discounted without the support of major shareholders, including financing. Especially when the market is bad, let employees come up with their own pay to buy stocks in the two-tier market, for the vast majority of employees, this is more difficult things. It could also lead to a far lower stake in the average employee than the Director-General's holdings, which could easily transform the employee-ownership plan into an executive-ownership plan.

Zheng to reporters, "employees can not enjoy restrictive stock discounts, nor as options do not pay to enjoy the future price increases." Equity incentives must have a larger discount, even if to pay a little tax, it is cost-effective; option, the employees do not pay a penny, you can enjoy the future share price rise, although to the point of tax, but after all, there is no investment costs, and staff holdings to dig real gold and silver.

In addition, the two-tier market needs a lot of money to buy stocks, through financing and leverage, it will increase the profit and loss of stock fluctuations, and finally, if all by the actual control of the fallback, for small and medium-sized listed companies, the stock market fluctuation risk all pressure on the actual control person, once the stock fluctuation, the lever effect will make the actual control person pressure is very big. Therefore, many listed companies also adopt a fully self-financing approach, but self-financing from the two-tier market to buy, it will appear to encourage the "color" deficiencies.

Incentive effect

Whether it is equity incentive or employee shareholding, its earnings are closely related to the stock price trend of listed companies. From what has been practiced for many years equity incentives can be seen, there are many successful examples, compared to the employee ownership plan, half price incentive if the cash, the incentive is still very obvious, the listed company employees through restrictive stock incentives to obtain the lower share cost, in the lifting of the time there is greater profit space, Therefore, active participation in incentive programs is the common choice of most incentive objects. But equity incentives are more of a company-oriented executive, and more like an incentive plan for executives.

In addition, the daily economic news reporter noted that prior to the introduction of the stock rights incentive listed companies, the right to the higher cost of the stock option, to the right of the line, often will appear the price of the right to be higher than the market price, for the right of the object, there is no attraction, also did not have the necessary incentive effect.

And in the high level when the introduction of employee stock ownership plan, although through self-financing and financing of the employee's willingness to share a discount, but still can be through the large shareholder gift or other reasonable innovative ways to achieve incentives. For example, some companies implement large shareholder fallback, although large shareholder fallback is not an essential element of employee shareholding plan, but the big shareholder fallback is undoubtedly let the staff eat a reassuring. For example, the company's actual control to provide financing funds, overweight after the implementation of two years, overweight staff exit, such as loss, by the actual control of the company to bear, 33 core executives, employees to 14.35 Yuan/ The average price of the shares increased the company shares 3.0128 million shares, even if the future share prices below the increase in average, there is no risk of loss. The actual control of this kind of money-giving incentives to bear almost all the risks, reflects the strong confidence in the share price, but also give the employee the confidence of holding.

However, if the employee's shareholding is entirely self-financing and there is no fallback clause, the incentive effect will be greatly reduced, especially the fixed-increase employee ownership plan. Some of these listed companies that have introduced employee-ownership plans have adopted private offerings that embed employee shareholdings. If the convenience of employee ownership is embodied in the adoption of the board and the shareholder's approval, it is not very convenient to adopt an embedded employee ownership plan, as the increase often involves refinancing, and the examination and approval of the Commission often takes several months. In addition, the increase in employee ownership can be discounted by 10%, but locked for 36 months, compared to the direct purchase from the two-tier market, where major shareholders did not provide financing and did not carry out fallback, relying solely on the legal salaries of employees and self-financing, obviously lack of incentives and incentives.

"Non-public offering is related to market price, basically in the first 20 trading days of a price range, indeed there is no obvious incentive, at most later there is a binding role, everyone's interests are the same." Because the company executives or employees holding the company's shares, the future development of the company, there will be a corresponding good income, the future is to have a stimulating role. But for the past, there is no incentive to buy, and the bundle of benefits can be achieved in other ways, such as buying from a two-tier market, "Wang Zhibin, a lawyer at Shanghai's law firm, told the Daily economic news."