What are the common types of equity incentives?

Based on your question, Jingbang Consulting here gives the following.

The common equity incentive methods and their respective advantages and disadvantages are as follows:

1. **Options.

1) ** Option is an option, which is the right to allow the incentive object to purchase a certain amount of ** of the company when the conditions are ripe in the future.

2) The company grants the incentive object in advance the first option, and the company sets the conditions that the incentive object can purchase the company's ** in advance (usually called the exercise condition), and only when the exercise condition is achieved, the incentive object has the right to purchase the company's ** (exercise), and the option becomes a real equity. The exercise conditions generally include three aspects: First, the company's side:

such as the predetermined performance that the company wants to achieve; The second is the waiting period: the waiting time after the option is granted (the waiting period is generally 2 to 3 years); The third is the incentive object itself: such as passing the assessment and not violating laws and regulations.

3) After the conditions for exercising the rights are mature, the incentive recipients have the freedom to choose whether to exercise or not to exercise the rights. The income obtained by the incentive object is reflected in the difference between the exercise price determined at the time of granting the ** option and the ** market price after the exercise. If the market price is higher than the exercise price and there is confidence in the company, then the incentive object will choose to exercise, otherwise the incentive object will give up the exercise and the option will be invalidated.

2. Restrictive**.

The company has set the performance target to be achieved by the company in advance, and when the performance target is reached, the company will give a certain amount of the company's ** free of charge or sell it at a low price to the incentive object. The granted ** cannot be sold arbitrarily, but is subject to certain restrictions, one is the restriction of the lock-up period: during the lock-up period, the ** granted to the incentive object cannot be sold.

The lock-up period is set differently depending on the incentive recipients. For example, the lock-up period for the company's directors and managers is longer than that of general incentive recipients. II. Restrictions on Unlock Conditions and Unlock Period:

When the established performance target is reached, the ** of the incentive object can be unlocked, that is, it can be listed and traded. Unlocking is generally done in phases, which can be at a constant speed or variable speed.

3. Value-added rights.

1) The company grants a certain number of ** value-added rights to the incentive object, and each ** value-added right corresponds to each share.

2) The company sets a ** benchmark price when granting the ** value-added right, if the execution date **** is higher than the benchmark price, the price difference between the two is the company's reward to the incentive object, and the total income obtained by the incentive object is the difference between the ** execution price and the ** benchmark price multiplied by the number of ** value-added coupons granted. Incentives are generally spent on undistributed profits. If the execution date **** is lower than the benchmark price, it will be punished, such as one-half of the difference between the ** execution price and the ** benchmark price will be deducted from the salary of the incentive object in installments.

4. Dividend right virtual**.

Virtual** is similar to dividend rights, and the company grants the incentive object a kind of income right, rather than a real one. The incentive object has no ownership, voting rights, and cannot be ****, and it will automatically become invalid when leaving the company.

The above is given by Jingbang Consulting according to your question, I hope it will be helpful to you. Jingbang Consulting, 16 years of focus on doing equity.

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The methods of equity incentives include:

1. **Options.

It is the right to allow the incentive object to purchase a certain amount of ** of the company when the conditions are ripe in the future.

2) options; 3) Performance**;

4) Dry strands; 5) Restrictive**.

When the performance target is reached, the company will give a certain amount of the company's ** free of charge or sell it at a low price to the incentive object.

6) Virtual**;

7) ** Value-added rights. The company grants the incentive recipient the right to enjoy the stock price ** income within a set period.

Extended Information :

Methods of equity incentives.

1.For operators and senior management.

The main purpose of equity incentives is to produce the dual effects of positive incentives and negative constraints, so under the current legal framework, most enterprises should mainly adopt the equity incentive method based on restricted futures shares combined with dividend rights. Here, "futures stock" indicates the equity ** for the implementation of the incentive and the method for the incentive recipient to obtain the equity; "Restrictiveness" restricts the conditions for the fulfillment of the rights of the incentive, which mainly reflects the "restraint function"; In addition, the "dividend right" strengthens the effectiveness of positive incentives on top of the incentive function of the "futures stock" itself, and it is also the "human capital" owned by the incentive.

Affirmatively. 2.For "important employees" such as management and technical backbones

Focus on the selection of "restricted stocks" combined with "performance dividend rights" based on equity incentive methods. As mentioned above, the "performance dividend right" refers to the "right to dividends" granted to these key employees, recognizing the value of their "human capital" and the right to participate in the distribution, but the exercise of this "right" should be directly linked to their own work performance, rather than unconditionally participating in dividends.

3.For sales personnel, especially the head of the sales department and the backbone of the sales business.

1) It is to adopt the method of "restricted stocks", granting salespeople a larger quota of futures shares, stipulating that half of their performance income (for example) must be used to pay the loan for the purchase of futures stocks (otherwise it will be invalid), and the equity they already actually own must be transferred and cashed out after a certain number of service periods.

2) It is the use of the "performance**" method to turn a part of the short-term income of the salesperson into long-term equity, which can reduce his short-term behavior to a large extent.

4.Incentives for general employees.

In general, equity incentives should not be used as the primary incentive tool. For the vast majority of ordinary employees, because they may not get a lot of equity, the correlation between the completion of the company's overall benefit indicators and his personal work efforts and his personal income is too low, and the effect of equity incentive will not be too obvious.

The methods of equity incentives include:

1. **Options.

2) options; 3) Performance**;

4) Dry strands; 5) Restrictive**.

6) Virtual**;

7) ** Value-added rights.

At present, there are many kinds of equity incentive tools on the market. The simplest way to tell the difference is in the incentive payment method. Common equity incentive instruments are divided into two main categories according to the payment method of the incentive object:

Real equity incentives and cash incentives. Among them, the real stock category includes **option and restricted**; Cash includes ** appreciation rights and virtual share awards.

**Option can be understood as an option given by the company to employees to be bullish on the future development of the company. If the company is **** in the future, the employee has the right to buy the company's ** at a low price.

Restrictive** refers to the company granting a certain number of employees at a low price**. When employees meet the conditions of the equity incentive plan, such as reaching the working years or performance targets, etc., they can obtain **restrictively** benefits.

**The right to increase value is a right granted by the company to employees, when the company's stock price rises, employees can obtain the corresponding amount of stock price appreciation income by exercising the right. Unlike real equity incentives, the right to increase value does not involve the actual issuance and trading. Ahong employees do not actually own ** and the corresponding voting rights, dividend rights, etc., and the income obtained after exercising the rights will be distributed in the form of cash.

Virtual share award means that the company will deposit the shares granted to employees into the trust, and after the employees meet the incentive conditions, the trust will issue them to the employees in cash after the secondary market. In fact, the employee did not receive the real Qing family register**, but received a cash reward from a secondary market company****.

The equity incentive method banquet is as follows: 1. Option Option refers to the right granted by the listed company to the incentive object to purchase a certain amount of the company within a certain period of time in the future with predetermined conditions and conditions. **In principle, options are applicable to overseas listed companies registered overseas and controlled by state.

The equity incentive recipient has the right to exercise this right and also has the right to waive this right. Shenqi Yin** options may not be transferred and used for security, repayment of debts, etc. 2. Value-added right Value-added right refers to the right granted by the listed company to the incentive object to obtain the income brought by the specified amount of increase in a certain period of time and conditions.

**The right to increase in value is mainly applicable to companies that issue foreign shares listed overseas. The equity incentive recipient does not have the ownership of these **, nor does it have shareholder voting rights and allotment rights. **The right to increase value cannot be transferred and used for security, repayment of debts, etc.

Listed companies can also learn from international practices according to the characteristics of their own industries and enterprises, and explore the implementation of other medium and long-term incentive methods, such as restrictive and performance.

Legal basis: Article 3 of the Trial Measures for the Implementation of Equity Incentives by State-Controlled Listed Companies (Overseas).

1. Long-term incentives.

From the perspective of employee compensation structure, equity incentive is a long-term incentive, and the higher the employee's position, the greater the impact on the company's performance. In order to make the company sustainable development, shareholders generally adopt the form of long-term incentives to closely link the interests of these employees with the interests of the company, build a community of interests, reduce costs, and fully and effectively give full play to the enthusiasm and creativity of these employees, so as to achieve the company's goals. [1]

2. The return mechanism of talent value.

The effective way is to directly implement equity incentives for these talents, closely link their value returns with the company's continuous increase in the value of the company, and repay these talents for the development of the enterprise through the company's value-added.

3. Company control incentives.

Through equity incentives, employees participate in decision-making related to the development and operation of the enterprise, so that they can not only pay attention to the company's short-term performance, but also pay more attention to the company's long-term development after they have part of the company's control, and are truly responsible for it.

Common models for equity incentives include options, virtual, restricted, employee stock ownership, and management buyouts.