On February 19, Suzhou Dongshan Precision Manufacturing Co.Ltd(002384) released the 2022 annual shareholding plan for core management personnel and technical talents. The plan does not require the holder’s capital contribution, and employees do not need to pay other expenses except for account opening fees, handling fees and relevant taxes. The source of shares is 1366100 shares previously repurchased by the company.
Recently, the “fracture price” and “zero cost” employee stock ownership plans launched by listed companies have attracted market attention. According to the reporter, as of February 20, three companies have launched “zero cost” employee stock ownership plans during the year.
Experts interviewed by the reporter believe that the original intention of the employee stock ownership plan is to motivate employees, but if it is not set properly in the design and implementation of rules, it may lead to incentive distortion and damage the interests of minority shareholders, and even be suspected of interest transmission. Regulators can improve relevant rules, guide the existing governance institutions of listed companies to play a role and carry out long-term supervision.
three listed companies in the year
publish “zero cost” employee stock ownership plan
Equity incentive and employee stock ownership plan are common ways for listed companies to motivate employees. According to the statistics of China stock market news choice, as of February 20 this year, 30 listed companies have issued employee stock ownership plans (based on the first announcement date). In terms of progress, 2 have been implemented, 15 have passed the general meeting of shareholders and 13 have passed the board of directors.
In the past, listed companies have implemented employee stock ownership plans, and there are many cases of employee “zero cost” stock ownership. According to incomplete statistics, in 2021, Perfect World Co.Ltd(002624) , Toly Bread Co.Ltd(603866) and other 13 listed companies’ employee stock ownership plans were “zero cost”. Since this year, in addition to Suzhou Dongshan Precision Manufacturing Co.Ltd(002384) , Anhui Korrun Co.Ltd(300577) , Fujian Forecam Optics Co.Ltd(688010) employee stock ownership plans have also been “zero cost”, and the latter two employee stock ownership plans have been inquired by the Shanghai and Shenzhen Stock Exchange.
“Whether the zero consideration is in line with the basic principle of ‘assuming sole responsibility for profits and losses, bearing risks and equal rights and interests with other investors’ in the guiding opinions on the pilot implementation of employee stock ownership plan by listed companies’, whether there is a situation of transferring interests to specific objects and whether it damages the interests of the company and shareholders.” Shenzhen Stock Exchange said in its inquiry on Anhui Korrun Co.Ltd(300577) .
“The original intention of the employee stock ownership plan is to motivate employees, but its purpose is complex.” Zheng Zhigang, a professor of finance at the school of Finance and finance of Renmin University of China, said in an interview with the Securities Daily that in addition to encouraging itself, it sometimes becomes a means for major shareholders to strengthen corporate control, senior executives to establish personal authority, and the company to maintain stock price stability. The original intention of implementing incentive through ESOP is good, but in the process of rule design and implementation, if it is not set properly, it may lead to incentive distortion, such as employees obtain incentive shares at “zero cost” or very low cost.
\u3000\u3000 “The implementation of employee stock ownership plan is to enable employees to bear symmetrical responsibilities for their rights and interests in some way in the future, which is also a basic principle of employee incentive plan in the world. However, if employees do not pay corresponding costs, that is, there is no corresponding acceptable income, it will increase their moral hazard tendency. Such employee stock ownership plans often produce The distortion of students’ incentive can not achieve the incentive effect in the end. ” Zheng Zhigang further said.
“According to the regulatory provisions, the stock grant price of the equity incentive plan shall not be lower than the par value of the stock, and shall not be lower than 50% of the market price in principle. As for the stock pricing of the employee stock ownership plan, the guiding opinions on the pilot implementation of the employee stock ownership plan by listed companies do not have clear provisions.” Qi Menglin, senior partner of Huashang law firm, said in an interview with Securities Daily that in the employee stock ownership plan, employees obtain shares at a lower price, which is conducive to maximizing the interests of employees; However, if it deviates seriously from the pricing of the stock price of listed companies, its commercial rationality is easy to be questioned, leaving room for benefit transmission.
“From the current situation, the relevant rules do not stipulate the shareholding price of the employee stock ownership plan, but the impact of the relevant plan on minority shareholders should be considered. If the company pays a high cost for the implementation of the employee stock ownership plan, it will have a great impact on the company’s profits and may affect the interests of other minority shareholders, so the supervision needs to pay attention.” Zhao Xijun, CO president of China Capital Market Research Institute of Renmin University of China, said in an interview with reporters.
the “zero cost” employee stock ownership plan
long term supervision
“The exercise rule is also an important indicator to evaluate the ESOP, that is, the lock-in period of the ESOP and the design of the lifting conditions are also very key.” Zheng Zhigang said.
Specifically, Suzhou Dongshan Precision Manufacturing Co.Ltd(002384) does not set performance assessment requirements at the company level in the employee stock ownership plan released. However, the company said that “it has set strict individual future performance evaluation requirements and income cashing cycle” and “the incentive object and grant scale match the established evaluation system of the company and the contribution of employees to the company”.
Fujian Forecam Optics Co.Ltd(688010) is to urgently modify the employee stock ownership plan after being inquired by the regulator, adjust the transfer price to 10 yuan / share without the contribution of the transferee, and add a new assessment target for the overall performance of the company.
For strengthening the supervision of “zero cost” or low-cost ESOP, Zheng Zhigang believes that regulators should guide the existing governance institutions of listed companies to play a role. ESOP involves the issue of equity change. From the perspective of procedure, the general meeting of shareholders should be held and some system design should be carried out at the general meeting of shareholders, so that minority shareholders can make their own voice and put forward their own demands, which will help to prevent or reduce the transfer of interests in the name of ESOP.
“Whether there is benefit transmission should focus on whether it damages the interests of small and medium-sized investors.” Zhao Xijun said that first of all, it depends on whether the ESOP itself complies with the relevant rules and whether the implementation process complies with the corresponding procedures. For example, in the board of directors and general meeting of shareholders, the motivated relevant personnel need to avoid and cannot participate in voting. If there is no avoidance mechanism, the plan may have defects or non-compliance; Secondly, it depends on whether the performance assessment requirements set by the company can encourage the core backbone to maintain stability, create value and bring more benefits to investors; Finally, the reduction design shall not affect the secondary market price and cause large fluctuations. Supervision not only needs to pay attention to the compliance of the plan, but also needs to continue to pay attention to the follow-up implementation.
Qi Menglin believes that the supervision should strictly check the continuity of the employee stock ownership plan and the rationality of the salary structure, and compact the responsibilities of all parties from the perspective of preventing the transmission of interests. In addition, the transfer of interests is hidden and long-term, and the supervision needs to carry out long-term supervision on the “zero cost” employee stock ownership plan.
