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Zhongguancun's Stock Option Reform
China Unicom and eight other high-tech enterprises in Beijing's Zhongguancun Science and Technology Park have been selected to carry out stock option contract trials.
Experts say such a system, under which the fortunes of employees are tied to the performance of their companies, might be an efficient way to prevent talent drain and stimulate work effort.
Li Chunman, vice-director with the Enterprises Department of the Ministry of Finance, said in the trial enterprises, management and technology staff are to be allowed to sign contracts with their companies to obtain the right (but not the obligation) to buy stock in the firm at a specified date at a certain price (usually a preferential price) which is agreed upon by the two sides.
"That implies the profits, or premium of the stocks, of the employees, are directly dependent on the operation conditions of their own enterprises," Li said.
The vice-director said high-tech enterprises, with relatively small investment and fast development, are more suitable to such a system.
Talent resources are the fundamental element influencing the success of high-tech enterprises, so the reforms would be first carried out among management and technology teams.
A brain drain and lack of stimulus system have been major headaches hounding the State-owned enterprises (SOE). With relatively low pay and rigid upgrading systems, many SOEs have witnessed a hemorrhage of their talented people to foreign-invested firms and even private firms in recent years.
Stock option contracts have been very popular in other countries, said Zhang Yanping, a professor with the Capital Economics and Trade University.
Among last year's Fortune Global 500, 89 per cent of the top companies had set up stock option contracts.
In Guangzhou and Shenzhen, a group of medium and small-sized high-tech private enterprises introduced stock option contracts two years ago, which has yielded a "pleasant result," said a manager of Guangdong Liyou Co Ltd, a software research and development enterprise.
"The establishment of a shareholding system and clear property rights are the prerequisites for the stock options contract reform," Zhang stressed.
Li acknowledged that, to date, the related policies and regulations are not in place, which hinders the expansion of stock options contract reform, especially in the State-owned enterprises.
Source: chindaily.com.cn
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