What Is a Long-Term Incentive Plan?

The long-term incentive mechanism is the owner (shareholder) of the enterprise. It encourages business managers and employees to work together to enable them to work stably in the medium and long-term of the enterprise and focus on the long-term benefits of the enterprise. An enterprise management system in which senior management personnel constrain and motivate employees and senior personnel at the agreed price and the right to purchase company shares (stocks) for a certain period of time in the future.

Long-term incentives

The long-term incentive mechanism is the owner (shareholder) of the enterprise. It encourages business managers and employees to work together to enable them to work stably in the medium and long-term of the enterprise and focus on the long-term benefits of the enterprise. An enterprise management system in which senior management personnel constrain and motivate employees and senior personnel at the agreed price and the right to purchase company shares (stocks) for a certain period of time in the future.

Chinese name

Long-term incentives

Purpose

In order to reduce

The most common forms of long-term incentive plans are employee stock plans and senior

1. Long-term incentives abroad

The implementation of long-term incentives should mainly follow the following principles:

1,

Golden handcuffs -retaining talents Golden handcuffs are retaining talents through long-term incentives;

Golden handshake -The golden handshake of the community of interest is through employee stock ownership and senior management

1. The core employees of the company "become a monk for one day", short-sighted, short-term behavior brings even hidden risks;

2. The company has experienced considerable development, but the entrepreneurial core employees have insufficient incentives and low satisfaction;

3. The company has a single form of salary incentives and cannot motivate core employees;

4. The company's incentives are insufficient, and the core talent is seriously drained;

5. The company is facing changes in property rights such as listing and restructuring, and needs to acknowledge the historical contributions of core employees.

Fixed share

1.Option mode

The stock option model is one of the most classic and widely used equity incentive models in the world. The main points of the content are: the company approved the shareholders general meeting to use the reserved unlisted common stock stock options as part of the package compensation, and granted or rewarded conditionally and freely at a certain option price in advance For the company's senior management personnel and technical backbones, the stock option holders can make options such as exercise and redemption within a specified period.

To design and implement a stock option model, the company must be a publicly listed company with a reasonable and legal source of stocks that can implement stock options, and a capital market with a stock price that can basically reflect the intrinsic value of the stock, operate in a more standardized manner, and be in good order. Carrier.

Lenovo Group and Founder Technology, which have been successfully listed in Hong Kong, implement stock option incentive models.

2. Restricted Stock Model

Restricted stock refers to the listed company grants a certain amount of shares of the company to the incentive object according to predetermined conditions. The incentive object can only sell the restricted stock and benefit from it if the working years or performance targets meet the conditions stipulated in the equity incentive plan.

3. Stock appreciation rights model

4.Virtual stock model

Set people

Three principles of appointment:

1. Potential human resources have not been developed

2. The degree of hidden information in the work process

3. Whether there is specific human capital accumulation

Senior management personnel refer to those who have responsibility for the company's decision-making, operations, and leadership, including managers, deputy managers, financial officers (or other persons who perform the above duties), secretary of the board of directors, and other personnel specified in the company's articles of association.

Three-level theory of economic state:

1. Core layer: the mainstay (share the fate and development with the company, and have the spirit of sacrifice)

2. Backbone layer: Safflower (opportunist, they are the focus of equity incentives)

3. Operation layer: Luye (job is just a job)

People at different levels should be treated differently, and often the backbone layer is the focus of our equity incentive plan implementation.

timing

The validity period of the equity incentive plan is calculated from the date of approval by the shareholders' meeting, and generally does not exceed 10 years. After the expiration of the equity incentive plan, listed companies may not grant any equity based on this plan.

1. During the validity period of the equity incentive plan, the stock options granted in each period shall be set with exercise restriction period and exercise validity period, and shall be exercised in batches according to a set schedule.

2. During the validity period of the equity incentive plan, the lock-up period for each restricted stock granted must not be less than 2 years. At the expiration of the lock-up period, the number of shares that can be unlocked (transferred, sold) by the incentive object is determined according to the completion of the equity incentive plan and performance targets. The unlocking period shall not be less than 3 years. In principle, a uniform unlocking method shall be adopted during the unlocking period.

Pricing

Determine the grant price (exercise price) of equity based on the principle of fair market price

The grant price of equity of a listed company shall not be lower than the higher of the following:

1. The summary of the draft equity incentive plan announced the closing price of the company's underlying stock on the previous trading day;

2. The average closing price of the company's underlying stocks within 30 trading days before the summary of the draft equity incentive plan is announced.

Quantitative

Fixed amount and fixed amount

Set a quantity:

1. Article 15 of the "Trial Measures": The total equity of the company granted by any incentive object of a listed company through all effective equity incentive plans shall not exceed 1% of the total share capital of the company, unless approved by a special resolution of the shareholders meeting .

2. "Trial Measures" During the validity period of the equity incentive plan, the expected level of personal equity incentives for senior management personnel shall be controlled within 30% of their total compensation level (including expected options or equity returns). The total remuneration level of senior management personnel shall be determined in accordance with the principles and regulations of state-owned assets supervision and management institutions or departments, and based on the performance evaluation and remuneration management measures of listed companies.

Fixed amount

1. Calculate the stock option forecast scientifically and reasonably with reference to internationally popular option pricing models or the fair market price of stocks.

Future value or expected return on restricted stock.

2. According to the equity incentive income and equity grant price (exercise price) predicted by the above measures, determine the number of senior management equity grants.

3. The total salary level of each incentive object and the proportion of the expected equity incentive income to the total salary level shall be determined according to the job sequence based on job analysis, job evaluation and job duties of listed companies. ^[1]