How to design the equity incentive mechanism of chain enterprises

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1.Dividend right Dividend right is an equity incentive adopted by many growth enterprises.

model, he also has a more well-known name called dry stocks.

We often hear people say that the boss gives him more or less dry shares.

2.Value-added right This method is suitable for enterprises with relatively stable profits, if the enterprise wants to become a leading enterprise in the industry and will be listed in the future, then the profits can not be fully divided, and it should be reserved for future development.

3.Real shares simply put, it is to give employees equity shares in the current period, but there are conditions for employees to sell, and this condition generally refers to the company's performance conditions.

4.Option incentives.

Most of this model is suitable for listed companies. The incentive recipient has the right to purchase a certain number of shares of the Company in a certain period of time in the future with pre-determined conditions and conditions.

Extended Materials. 1. Equity incentive is a method for an enterprise to take out part of its equity to motivate senior managers or outstanding employees. In general, there are conditional incentives, such as how many years the employee needs to work in the enterprise, or complete a specific goal to be motivated, when the incentive personnel meet the incentive conditions, they can become shareholders of the company, so as to enjoy shareholder rights.

In the early stage of the development of start-ups, funds are relatively tight, and one of the biggest problems caused by insufficient funds is the loss of personnel, especially the senior managers and core employees of the team, whose loss will have an immeasurable impact on the startup. In order to improve team cohesion and retain management and core employees with limited salaries, entrepreneurs racked their brains and slowly developed a long-term incentive system for other members of the company's senior managers and core employees, namely equity incentives, with the company's equity as the target.

1. Option mode**Option.

Agree to grant or reward the company's senior management and technical backbone conditionally and gratuitously free of charge with a predetermined option** as part of the "package" of remuneration, and the holder of the ** option may make the option of exercising and cashing out within a specified period of time. The design and implementation of the first option model requires that the company must be a public listed company, with reasonable and legal, can be used to implement the first option, and requires a capital market carrier that can basically reflect the intrinsic value of the first price, and the operation is relatively standardized and in good order. Lenovo Group, which has been successfully listed in Hong Kong.

and Founder Technology, etc., implement the first-class option incentive model.

2. Restrictive**.

Model restrictiveness** refers to the fact that the listed company grants a certain number of incentive recipients to the company** in accordance with pre-determined conditions, and the incentive recipients are only available for working years.

or if the performance target meets the conditions specified in the equity incentive plan, it can be **restrictive** and benefit from it.

I think there are four key steps in the ESOP process: the first is the design of the scheme, the second is the establishment of the trust and tax compliance consulting, the third is the data management, and the fourth is the enforcement of the rights.

The scheme design process is usually the most concerned by the boss, and the concerns cannot escape these questions: when should it be started? How much of the option pool should be set aside? How do I choose an incentive tool? How to choose the incentive recipients? How to distribute it to have the best incentive effect?

In fact, these problems need to be tailored according to the actual situation of the company's industry, development stage and team configuration, and it is difficult to generalize.

The second step of ESOP is trust formation and tax compliance advisory. For overseas structures and enterprises planning to be listed overseas, trust and tax planning are very concerned by the founders and senior management team, which is a work with extremely high policy and legal thresholds, which needs to be completed by very professional trust companies and accounting firms.

Data management and the implementation of rights are the most critical and cumbersome steps in the entire ESOP implementation, which are related to whether the entire ESOP implementation can be successfully completed, and are also the most concerned issues for CFOs and HRDs.

Due to the long time span, large number of personnel, numerous scenarios, diversified incentive tools, various tax issues arising from employees' nationality, and signing in different places all over the country and around the world, etc., 180 days after listing, there began to be a large number of long-term consultation and various problems for the exercise of employees' rights.

In fact, equity incentives are a long-term incentive mechanism throughout the life cycle of an enterprise. Enterprises need to focus on different priorities at different stages, and usually need to dynamically adjust the design and implementation of incentive plans by matching factors such as the company's long-term development plan and manpower scale planning.

After the founder or management decides to initiate the employee plan, they may further consider the specific arrangements of the employee option plan, including but not limited to the following key aspects:

1.Determine the number of grantees and the number of options by category and time point of the grant object;

2.Select the type of option to be granted, such as whether it needs to be attached to voting rights and dividend rights, among which, the dispersion of voting rights has the possibility of increasing management risks and management costs;

3.Establish the conditions, time and time limit for exercising the rights;

4.Determination of Exercise**. As part of the employee's salary and benefits, the earlier the option is exercised, the higher the discount;

5.Consider the exit mechanism, including the separation of different situations to reflect the difference in the repurchase conditions. In addition, you can also consider whether you need to set a lock-up period;

6.Establish an administrative structure for employee option plans and improve the approval process.

1. Market selection mechanism.

The adequate market selection mechanism can ensure the quality of managers and have a long-term restraining and guiding effect on managers' behavior. It is difficult for managers identified by administrative appointments or other non-market options to align with the long-term interests of shareholders and to make incentive and restraint mechanisms work. There is no basis for providing equity incentives to such managers, and it is not in the interests of shareholders.

The professional manager market provides a good market selection mechanism, a good market competition state will eliminate unqualified managers, in this mechanism the value of managers is determined by the market, managers in the process of operation will consider their own value positioning in the manager market and avoid speculation, laziness and other behaviors. In this environment, equity incentives can be economical and effective.

Second, the market evaluation mechanism.

Without an objective and effective market evaluation, it is difficult to make a reasonable evaluation of the value of the company and the performance of the managers. In the case of excessive market manipulation, excessive intervention and social audit system can not ensure objectivity and fairness, the capital market is inefficient, it is difficult to determine the long-term value of the company through the stock price, and it is difficult to evaluate and motivate managers through equity incentives. Without a reasonable and fair market evaluation mechanism, it is impossible to talk about managers' market choices and incentive constraints.

As an incentive tool, equity incentives are of course unlikely to play a role.

3. Control and restraint mechanism.

The control and restraint mechanism is a restriction on the behavior of managers, including laws, regulations and policies, company regulations, and the company's control and management system. A good control and restraint mechanism can prevent managers from detrimental to the company's behavior and ensure the healthy development of the company. The role of the restraint mechanism is irreplaceable by the incentive mechanism.

The problem of the operators of some state-owned enterprises in China is not only a problem of incentives, but also a problem of constraints to a large extent, and strengthening the building of the corporate management structure will help improve the efficiency of the restraint mechanism.

Fourth, the comprehensive incentive mechanism.

The comprehensive incentive mechanism guides the behavior of managers through comprehensive means, including salary, bonus, equity incentive, promotion, training, welfare, good working environment, etc. Different incentive methods have different incentive orientations and effects, and the best incentive methods corresponding to different enterprises, different managers, different environments and different businesses are also different. Companies need to design incentive combinations for different situations.

The form and size of equity incentives depend on the comprehensive consideration of incentive costs and benefits.

Fifth, the policy environment.

** It is obligated to provide policy support for the formation and strengthening of various mechanisms through laws, regulations, management systems, etc., and create a good policy environment, and inappropriate policies will hinder the role of various mechanisms. In terms of market environment, it is also necessary to create a good policy environment by strengthening capital market supervision, eliminating unreasonable monopoly protection, separating government from enterprises, and reforming the appointment of operators.