Equity incentive (I): how to design equity incentive program

Equity incentive as a long-term incentive model, can make up for the limitations of short-term incentives, reversing the tendency of short-term behavior of the operator, retaining the excellent, core staff and business backbone, enhance the competitiveness of the company, in the process of practice is widely respected. The author takes XX Enterprise Group as an example to discuss the issue of equity incentives. XX Enterprise Group, in order to maintain its invincible position in the fierce market competition, needs to break the barriers of traditional thinking and introduce new mechanisms. Although it has carried out multi-faceted and multi-channel exploration and attempts, its vitality is still far from enough compared with that of private enterprises. The reason for this is that the separation of operator and ownership has not been touched. For XX Enterprise Group, the author's consulting advice is to take advantage of the opportunity to prepare for the establishment of the marketing company, as a pilot of the equity incentive reform, to try to reform the existing property rights system, and to explore an effective and efficient management mechanism. For the marketing company, its future determines the success or failure of the entire group of companies in the market, how to establish a sound incentive mechanism, so as to maximize the stimulation of human creative potential, in order to drive the development of the enterprise, which will be a prerequisite for the success of the marketing company. Therefore, with reference to the internationally proven incentive methods, such as term shares, stock options and other incentives, annual salary system and other ways to make useful attempts. The purpose of the establishment of the marketing company equity incentive mechanism is to solve the problems caused by the separation of ownership and operation, the company's management personnel's interests and the convergence of the group's interests, so that the management to bear the risks and benefits of the operation, so as to promote the company's continuous development and growth.

A common equity incentive tool

Cash in shares, cash in shares refers to the investor in the beginning of the creation of the company or in the company's capital expansion, in the form of cash to obtain equity, with equity endowed with full rights. Cash-in is the simplest and most common way to acquire equity. Cash-in shares were mandatory and mandatory 20 years ago, and have evolved to become a right today, and it is very difficult to really own the so-called original shares of a company without certain qualifications or background in the company.

Period shares, period shares refers to the acquisition of equity in the form of personnel, you can not in the form of cash to obtain equity, but at an agreed price by a special department of the custody of the equity to the equity acquired annually dividends as the purchase of equity funds until the completion of the purchase, to obtain full rights. The option shares only have the right to dividends and voting rights before the funds are available, and can only be converted into common shares after the funds are available. Option stock is an equity incentive method with Chinese characteristics, combining the characteristics of options and dry shares (gift shares), a mode adopted on the basis of dry shares to absorb the advantages of options, and a kind of system innovation. Option shares are mainly an incentive for companies to senior managers to replace cash with stock. Some entrepreneurs usually throw this rugby ball in order to make consultants work for them more.

Options, also called share options, are future rights, not obligations, given by a company to its employees to buy a certain number of the company's common shares at a pre-agreed price in a future period. There are three elements that make up the exercise period, the approximate price and the exercise price. Employee's implementation only gives the employee the right to become a shareholder of the Company and does not become a shareholder of the Company until the purchase right is exercised. Options are only an option given by the company to its backbone and core staff, and are uncertain, expected income to be realized in the market. There is no cash outlay for the enterprise, which is conducive to reducing the cost of incentives.

Management shareholding, management shareholding refers to the enterprise high and middle level management personnel in various ways to hold the company's shares, that is, the management become shareholders, which is mainly to solve the problem brought about by the separation of ownership and operation.

Two, the overall incentive model

Based on the specific circumstances of the marketing company, for different classes of work nature and characteristics, to take different incentive. The following table lists the incentives at all levels.

The company's top management (general manager, deputy general manager) as the key incentive object, the purpose is to its personal interests and the long-term interests of the enterprise completely tied together, the establishment of a future-oriented long-term incentive system, in order to fully mobilize the wisdom of the operator, talent, and inject vitality into the development of the enterprise. Its incentive method synthesizes a variety of types currently carried out in China: cash in shares + option shares + annual salary + options (share options) + allowances.

Middle management and business personnel are the backbone of the company's future. The incentive for middle management is: cash in shares + option shares + annual salary + options (share options) + allowances, which is basically the same as the top level, but the amount of equity incentives is much smaller; taking into account the timeliness of the work of the middle business (area manager), the annual salary system is changed to a monthly salary system in order to timely assessment and rewards, the incentive: cash in shares + option shares + monthly salary + bonuses + options (share options) + allowances.

The incentives for core staff and high-performance salespersons take a combination of monthly salary, bonus, allowances and options, with a high weighting of monthly salary, while stock options are granted to retain much-needed talents in the enterprise.

The remuneration of salespersons and housekeeping staff consists of bonus, monthly salary and allowance, and for salespersons, bonus is the main part of their remuneration.

Additionally, the top management of XX Enterprise Group can consider granting option shares, and the directors and supervisors of the marketing company can consider using the remunerations of allowances, option shares and options.

Three, equity incentive program

Equity incentive object, marketing company's middle and senior management are the object of equity incentives, including a general manager, deputy manager of one to three, the tentative six ministers (marketing, sales, logistics, finance, administration and personnel), and 10 area managers, - global brand network - a **** 20. About XX enterprise group senior, marketing company directors can also consider the use of option shares or options incentive, in addition to the marketing company to enter the future of the senior talent to reserve incentive space. It should be noted that, in principle, equity incentives to risk *** share, income *** points as a starting point, only for middle and senior management, do not face ordinary employees.