What Is an Incentive Trust?

Trust refers to the trustee's trust in the trustee to entrust its property rights to the trustee, and the trustee will, in the name of the trustor, manage or dispose of the beneficiary's interests or specific purposes. In general, the client and the beneficiary are the same party.

Fiduciary duty

Right!

Entrepreneur trust responsibility refers to the responsibility of the entrepreneur who acts as an agent in the principal-agent relationship to maintain the business operation and development of the principal and to promote the preservation and appreciation of corporate assets.

Status and hazards of trust liability

I. Trust responsibilities of entrepreneurs to the state and society

An entrepreneur is a social person first, and then a businessman. The survival and operation of an enterprise cannot be separated from society, so it must have a fiduciary responsibility to the society and a responsibility to the country's economic security. However, entrepreneurs are not doing well in this regard. Excessive attention to the economic benefits of enterprises and individuals is an important reason for the lack of entrepreneurs' responsibility for the state and social trust.

1 Loss of state-owned assets

During the reform of state-owned enterprises in China, some entrepreneurs exploited the loopholes in national policies, embezzled state-owned assets, caused the loss of state-owned assets, and endangered national and social interests. In the reform of the state-owned enterprise system in China, some entrepreneurs lacking trust responsibilities conduct black-box operations, and insiders use a lot of state-owned assets to reduce their operating profits, manipulate asset evaluations, and illegal financing. According to statistics from relevant departments, at least 80 to 100 billion yuan of state-owned assets are lost every year. The World Bank estimates that the loss of state-owned assets in China accounts for about 8% to 12% of GDP. The loss of state-owned assets at such an alarming rate has become an increasingly serious problem that plagues reform and development and threatens national economic security.

2 Destroy the ecology and pollute the environment

In the daily business process, we only pay attention to maximizing the interests of the company and regardless of environmental pollution and ecological damage caused by the operation of the company. Such enterprises do not account for a minority in our country. The main reason is that these behaviors of the enterprise are external and not directly linked to the interests of the enterprise. Entrepreneurs only pay attention to the profitability of the enterprise and ignore the environment too much. However, the consequences of such actions ultimately require the society to pay for them, and the harm to the society is several times the income of the enterprise, which is worthless for the entire society.

3 Serious tax evasion

Enterprises have a responsibility for public welfare. While enjoying public resources, they need to give back to the society. It ranges from the construction and maintenance of public welfare facilities to generosity in the face of national calamity. This is the obligation of each country, and it is also an entrepreneur. Unshirkable responsibility. Taxation is the secondary distribution of national income, and paying taxes in full and on time is the responsibility of the state for construction, and it is also an embodiment of the entrepreneur's social trust responsibility. However, there are many tax evasion and tax evasion in China, and some entrepreneurs do not have the responsibility. Awareness of tax liability, and others plan to use a series of means such as financial fraud or related party transactions to achieve tax evasion.

Entrepreneurs' fiduciary responsibilities to enterprises and asset owners

1 Increased business risk

Entrepreneurs are the core figures of an enterprise. Their primary task is to control the macro strategic development direction of the enterprise, fully organize human and material resources, mobilize the enthusiasm of employees, make them coordinate and cooperate to achieve the goals of the enterprise, and complete the mission of the enterprise. If an enterprise is to be managed by an entrepreneur without fiduciary responsibilities, it is tantamount to allowing the enterprise to survive on its own in the fierce market competition. How can such a company operate well? How can it develop well? Enterprises in the market competition are already facing challenges and risks from many aspects, both internally and externally. A little carelessness may cause them to lose miserably. A hard work may not guarantee a good business development, plus an irresponsible helm Or, its operation can be described as risky.

2 Harm the interests of corporate shareholders and cause lack of investor confidence

Due to the existence of the principal-agent relationship, shareholders' understanding of the company is indirectly through the report data provided by entrepreneurs, etc., lacking first-hand information about the true situation of the company, and the information is relatively lagging behind, and the company's status cannot be managed in a timely manner. Entrepreneurs with missing fiduciary responsibilities are given the opportunity. They use their own advantages in power and information to deceive investors, embezzle bribes, pull relationships for kickbacks, and fatten their businesses. The source of funds for corporate development is the investment of shareholders. The lack of entrepreneurs' trust responsibility damages the interests of shareholders, and also affects the enthusiasm of shareholders for investment. The lack of funds will cause the company to fail to survive.

Some entrepreneurs have even more serious behaviors. They set up a company to attract investment from all parties, and finally set up a name to evade funds through various methods, transfer shareholders' investment to their own hands, and then go bankrupt and liquidate. Such behavior is illegal, and at the same time it causes chaos in the investment market, jeopardizes the economic security of the market, and hurts the interests of investors. On the one hand, it shows that our country's legal system is flawed in this area, and it gives people with bad attempts to take advantage of it. On the other hand, it can also be seen how serious the lack of our entrepreneur's own trust responsibility is. To achieve their illegal pursuit by harming the interests of shareholders.

3 Harm employees' interests

The existence and operation of an enterprise is not simply a matter of concern to shareholders and entrepreneurs, and employees of the enterprise are equally concerned. Employees co-exist with the enterprise. Entrepreneurs are not only responsible to shareholders to the enterprise, but also to employees of the enterprise. If the entrepreneur's trust responsibility is missing, the business is not good, and the interests of employees are also damaged.

Reasons for lack of fiduciary responsibility

I. China's entrepreneurs have a weak sense of responsibility

The development of China's principal-agent system is not long. In many aspects, it is based on the experience of the West and the existing system. The development is still immature, especially the education and training of entrepreneurs has not reached the state of the United Kingdom. It just emphasizes the enterprise. What kind of talents should a family have, but relatively neglecting the moral concern, which has caused many entrepreneurs in our country to lack trust responsibility.

Second, China's enterprise principal-agent system is unreasonable

At present, some members of the board of directors and managers in China's companies are appointed by appointment. In fact, the agency relationship between shareholders and operators is completely lacking in the choice of the market, making the definition of power between the two more difficult. There is also multi-level agency, which leads to out-of-control agency rights and unclear agency responsibilities. These series of problems ultimately lead to the lack of risk-responsibility of the operators of the enterprise and the inability to bear the responsibility of managing the enterprise.

Insufficient incentive and restraint mechanisms for Chinese enterprises

In modern enterprises, due to the agency problem, a mechanism must be designed to coordinate the objective functions of the principal and the agent, so that the agent can maximize the expected utility of the principal while pursuing the maximization of personal wealth. These systems It includes both incentive and restraint mechanisms. In our country's enterprises, many companies' incentive policies for managers cannot play a role. The entrepreneur's personal income is linked to the company's operating profit. The purpose is to motivate entrepreneurs to make better profits for the company, but many entrepreneurs However, the use of financial fraud and sales fraud to falsify profits, damage the interests of the company, but still get considerable income, which involves another problem, that is, the company's supervision and restraint system for senior managers is not sound. The interests of senior managers are often the same. They are pursuing the maximization of their own interests. In this case, they may collude with each other to cover up the truth of their wrongdoing.

Fourth, China's legal constraint mechanism is not perfect

China is a country in the civil law system. The judge's judgment is based on the existing legal provisions, and the economic environment is complex and changeable. Many laws lag behind the economic situation. This has created some legal loopholes and made some lawbreakers. With the opportunity.

Missing fiduciary response

I. Measures the State Should Take to Maintain National Economic Security

1 To enhance education on entrepreneurs 'trust responsibilities In China, the lack of entrepreneurs' trust responsibilities has become a widespread and serious problem that must attract widespread attention from the entire society. In order to realize self-restraint, we must carry out extensive education on the trust responsibilities of entrepreneurs in the whole society and enhance the inherent responsibility of entrepreneurs.

2 Establish and improve the legal system

Entrepreneurs in China cannot consciously bear their fiduciary responsibilities. To ensure the sound operation of enterprises, they must establish sound laws and regulations to regulate and restrict them. The state should intensify legislation and law enforcement to ensure the safety of China's economic market. Only in this way can the entrepreneurs' self-interest be restrained and a good platform for the operation and development of enterprises can be provided.

Second, enterprises should take measures to reduce business risks

1 Introduce the personal property rights mechanism and strengthen the incentive mechanism The lack of entrepreneur's trust responsibility is caused by the principal-agent problem, and the inconsistency of the utility function between the operator and the owner is an important reason for the principal-agent problem, so we need to introduce more reasonable The assessment and incentive mechanism is to try to make the interests of the two converge instead of diverge. In Western companies, the personal income of shareholders is directly related to the appreciation of their assets, and the income of agents is more directly linked to the business performance of the enterprise. This is the fundamental reason for each subject and agent of the property rights to be innovative and aggressive, and to be able to restrain their behavior. Under the company property rights system, a similar incentive mechanism can be introduced to link the income of corporate managers with the profit and loss level of the company's assets and the business performance of the company. At the same time, since the reputation and reputation of property rights representatives and managers are related to whether they can continue to serve or be promoted in the future, linking "intangible benefits" such as social reputation and career prospects with the business performance of state-owned property rights representatives is also a An effective incentive mechanism.

2 Establish a reasonable board structure

Corresponding to the structure of professional committee boards in the United States and other countries, China's board of directors has unclear division of labor and unclear responsibilities. It is necessary to strengthen the independence of the board of directors and increase the proportion of external directors, especially to increase the number of independent directors and the effectiveness of implementation. Inside the board of directors, there should also be representatives of minority shareholders' interests. Different representatives of relevant interests build a comprehensive range of shareholder interests, avoiding the attitude of major shareholders who do not consider the interests of the overall shareholders because of the large proportion of equity.

3 Strengthen the supervision and restraint mechanism for entrepreneurs

When formulating a risk control mechanism, enterprises must fully consider the constraints on corporate managers, give full play to the role of independent directors and the board of supervisors, strengthen supervision, and set up the size and structure of the board of directors to prevent the impact of excessive internal shareholder rights. The independent supervisory function of the board of directors. Studies have shown that the incentive intensity of the same contract is positively related to the strength of the board of directors. That is, when the board of directors strengthens the supervision of the company's managers, the board's incentive efficiency is higher. The structure and size of the board of directors affect the degree of supervision of the board of directors. When the structure and size of the board of directors are more conducive to strengthening the supervision of the company's managers, the board's incentive efficiency to the company's managers will become more obvious.

4 Clarify the scope and responsibilities of business operators

Entrepreneurs are prone to authoritative and unauthorized acts due to unclear responsibilities in the business process. Based on this problem, it is necessary to set up the enterprise reasonably in the enterprise's right setting system.

Responsibilities and powers of the home, so that rights and responsibilities correspond. Responsibility is used to restrict the behavior of entrepreneurs. When entrepreneurs need to bear corresponding responsibilities for their actions, they can constrain their actions consciously. ^[2]

Birth history of fiduciary responsibility

In the 15th century, there was a boom in discovering the new continent in Europe. People were encouraged by various legends, hoping to find a way to the mysterious and rich China in the far east.

In 1533, 250 British people each gave 250 pounds, and three ships hired 200 sailors, entrusting them to go north along the Atlantic Ocean to find a sea passage to China.

The 200 sailors were unambiguous. They headed north all the way to the North Pole. On the way, a severe storm was encountered near Norway. Three ships were sunk by the waves and two were left. In the end, only the largest Moscow Vessel remained, and they persisted to the North Pole. After landing ashore, they sleed for 2,000 kilometers in the wasteland. It was not until they met Aven, the famous terror king in European history, that they could not go to China. They exchanged pens and ink for souvenirs such as mink in Ivan's hand. "Both sides thought it was a very cost-effective deal." They returned to Britain with great pains.

They did not complete the scheduled tasks, but just proved that the road to the north cannot reach China. So they used Ivan's mink for money to repay the businessmen's investment.

The 250 businessmen did not follow them, and they knew that since the 200 sailors were commissioned, the only correct choice was to trust them.

The sailors accepted the commission, and they believed that this was the trust that 250 investors had placed in them, and only due diligence could they repay the trust. That's why they worked hard, and insisted on their mission even if the ship was sunk by the waves. Failure to find a way to China is not a complete task, so the sailors have to return the money to investors.

This is the creation of trust.

Public office is credibility

Since then, fiduciary responsibility has become a fundamental value rooted in the professional manager's heart: a public office is a public trust. Cicero interprets it as saying that if a person holds a certain position (to hold an office), he is an official in that position, he assumes certain obligations, and he should be responsible. At the same time, people are free to give him the power connected to this position, and accordingly he will be expected to exercise this power responsibly and fully consider the interests of others when dealing with matters.

Such principles later became the consensus of a civilized society.

In 1841, a cruise ship William Brown accidentally hit an iceberg and sank in the North Atlantic. Forty-one survivors crowded into a small boat, but the boat was overloaded and could face devastation at any time. Two days later, in order to allow more survivors to survive, the crew threw 14 male passengers into the sea. Two married male passengers, a little boy and all female passengers, and the crew themselves were left on board. The court at the time recorded: "No crew member was thrown into the sea. One of them was a cook and still a black man." You know, racial discrimination was serious in the United States at that time.

The following year, the families of the victims brought the crew to court, and the federal court heard the case as a murder.

Hermes was one of the survivors, and his lawyer defended him in court saying that when the ship sank in the ocean, everyone returned to the state of a natural person, and everyone could do their best Safeguard their lives without having to think about the responsibilities that civilized society gives them. Therefore, Hermes' self-protection motive, "it is understandable to leave passengers in this strange and urgent situation."

The judge did not think so. The crew has the obligation of the crew, and even if they return to the state of natural persons, this obligation still follows them.

The judge's verdict reads: "The nature of social law places crews and passengers in different relationships, and we can confidently claim that the duty of the crew is to protect passengers who trust them, not to sacrifice them."

In the end, Hermes was found guilty.

That is, the concept of fiduciary responsibility precludes excessive attention to self, including abuse of power. For hundreds of years, the concept of fiduciary responsibility extended to the legitimacy of power. It is generally believed that when a person who owns power abuses or seeks private power, then power has no legitimacy.

Abuse of power

As Pope John Paul II pointed out in The Hundred Years of Circumstances, "When power cannot be exercised properly and even hinders the interests of others, it will lose its rationality. Because its starting point is to obtain personal benefits, This benefit does not come from the overall development of the cause and the common accumulation of social wealth. Instead, it comes from illegal exploitation and speculation that harms the interests of others, and from the trample on unity and harmony between others. This kind of power is completely unjust. In the eyes of God and his people, it is an abuse. "

This idea originally came from religion. All religions in the world, regardless of their size, respect the ethical principle that over-concentration of the self will disturb the mind and make people lose the ability to judge right and wrong. Getting rid of self-anxiety begins with self-examination and testing. As the Old Testament and Ezekiel said, "Woe! Shepherds only know to shepherd themselves. Shouldn't shepherds keep sheep?"

In the Wall Street financial crisis of 2009, the executives of large companies led by Lehman Brothers knew how to nourish their own shepherds. Those in high positions, holding huge annual salaries and bonuses, almost gave up their duties in the face of money and benefits, and at the expense of the interests of investors and shareholders for their own personal gain, eventually led to a global financial storm.

In fact, fiduciary duty does not provide people with a set of code of conduct, it is a restraint mechanism composed of culture, customs and daily behaviors. In a developed market environment, when accepting each trust responsibility, people do not know whether the trustee can comply with these conventions, but can assume that he can complete the commission based on experience and customary practices, and in most cases do not Unexpected.

The trust relationship requires the person accepting the entrustment to put the interests of others, especially the interest of the principal, first. In this way, its behavior can reflect a broader appeal, interests and the value of the trust network. At the same time, we strive to treat the interests of others as an extension of self-interest, so as to ensure that the interests of others are realized in accepting the client's duties. This process is not compulsory and forced, and it often appears as the willingness of the client, without supervision, and sometimes even a completely independent behavior.

Of course, such a standard is not enough. The law must provide basic guarantees for the implementation of liability trusts. Moreover, the laws enacted for this have become the basis of the entire market's profit-for-wealth mechanism. It is embodied in the specific specifications of the fiduciary responsibilities of the agents, partners, trustees and corporate executives and managers of each contract.