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How to Provide Incentives for the Executives

2021-03-26 来源: 51Due教员组 类别: Essay范文

51Due教员组今天给大家带来一篇人力资源essay代写范文,偏法律方向。21世纪是充满机遇与挑战的时代,是适者生存的时代,也是人力资源竞争激烈的时代。人力资源被视为企业的核心能力之一,如何有效实施激励机制成为留住人才的主要难题。为了更仔细地研究激励机制,本文选择了一份报告,重点研究了一种吸引中国企业关注的激励方法,即“金降落伞计划”。

在对报告进行了简要总结之后,本文继续阐述了金降落伞计划的由来,中国大陆的发展以及该计划如何为高管带来激励。尽管可能是金色降落伞计划的新颖之处,但该计划背后也存在与合法性和确定性有关的潜在风险。为了充分利用这种激励方法背后的优势,应依法确定性地进行设计。因此,为高管制定一个稳定而长期的黄金降落伞计划可以有效地增强他们的企业忠诚度,信心和荣誉感。

How to Provide Incentives for the Executives

——based on a study of “Golden parachutes” in China

Abstract


The 21st century is an era full of opportunities and challenges, an era of the fittest survive and an era of fierce competition in human resources. Human resources is regarded as one of the core competence for an enterprise and how to effectively implement the incentive mechanism is becoming a main difficulty in retaining the talents. In order to have closer look upon the incentive mechanism, this essay selects a report that focus on one incentive method that is attracting much attention from the Chinese enterprises—the golden parachutes plan.

After a brief summary of the report from, the essay goes on to elaborate on the origin of the golden parachutes plan, the development in mainland, China and how this plan brings in the incentives for executives. Novel as the golden parachutes plan may be, there are also potential risks behind this plan concerning legality and certainty. To make the best use of the advantages behind such incentive method, it should be designed in accordance with law and with certainty. Thus, a stable and long-term golden parachutes plan for the executives can effectively strengthen their corporate loyalty, confidence and sense of honor.


Key words: incentives, the executive, golden parachutes plan






Words account: 1478


Contents


Abstract………………………………………………………………………....

1

A Brief Summary of the Report………………………………………………..

3

1.1

Main worries among the executives…………...……….............

4

1.2

Application of the golden parachutes plan…………..….……...

4

An Overview of the Golden Parachutes Plan………………………………….

5

2.1

Origin of the golden parachutes plan……………………….......

5

2.2

Development in mainland, China……………………….……...

5

2.3

Incentives for executives under the plan…..……………………

5

Potential Risks of the Golden Parachutes Plan……..………………………...

6

3.1

Legality of the plan…………………………………………...

6

3.2

Certainty of the plan………….……………………….……...

6

3.3

Advice for the incentive plan…………….……………………..

6

Conclusion

………………………………………………………………….

7

References

………………………………………………………………….

8



A Brief Summary of the Report

“On the applicability of the golden parachutes in some enterprises in China” is a report which centres on one incentive method for the executives—the golden parachutes plan. Content of the report can be divided into 2 part: main worries among some top managers in mainland, China, especially in the state-owned-enterprises (SOE) and the introduction of the golden parachutes plan as an attempt to solve the existing problems.


1.1 Main worries among the executives

According to the “Chinese enterprise manager questionnaire follow-up survey” implemented by the Chinese entrepreneur survey system, the biggest worries of the managers in state-owned-enterprises are “insufficient social security”, “psychological loss without sustenance”, “reduced economic income” and “no satisfactory social status”. When the executives and even leaders who have worked for the company for years or even their whole lives are facing the retirement age, most people don’t want to be side-lined when their time is running out, so the rush to change has become a common denominator among them. But there are only a few ways to hold the shares, such as making a loss, valuing the business at a low price, hiding assets, transferring profits, or using funds from unknown sources, all of which carry high risks and are of no doubt doing harm to the future development of enterprises.


1.2 Application of the golden parachutes plan

Social security and economic income can be solved by means of pension and other material security, but once factors such as “psychological loss” and “social status dissatisfaction” cannot be met, it can be disempowering--a condition that requires businesses to consider the golden parachutes plan. The author believes that the emphasis is on highlighting the “gold” and “parachutes” of the Golden Parachute, that is, the rewards should substantial and the security is a long-term one. The implementation of such a golden parachute plan is necessary for Chinese state-owned-enterprises since it is an effective means to motivate the executives. Recent years, the concept of Golden Parachute has been widely recognized and tentatively used in China to solve the historical contribution of some enterprises in the process of restructuring, in order to eliminate or make up for the huge gap between the material interests and the psychological losses of those senior managers before and after their retirement.


An Overview of the Golden Parachutes Plan

2.1 Origin of the golden parachutes plan

The “Golden Parachute” clause, which originated in the United States, provides a sufficient guarantee for the financial compensation of the top executives after they leave their jobs. The guarantee takes the form of severance payment, bonus, stock option and its corresponding combination. “Gold” represents a rich compensation, “parachute” means that the executives, while facing the changes in corporate control, also manage to achieve a smooth and “soft” landing. In essence. Golden parachutes plan is a special form of management employment and compensation contract.


2.2 Development in mainland, China

The application of the golden parachutes plan in mainland China is inspired by some pioneer companies and prompted by typical cases where such clause played an important role, such the case of “Bao An”, “Wan Ke” and etc. Generally, the golden parachutes plan will be added to the articles of association of the enterprise as the Golden Parachute Clause. Up to date, there are more than 600 companies in mainland, China that have amended their articles of association in order to take in the Golden Parachute Clause, such as the listed companies like Ya Hua. (Liu Tian, 2019)


2.3 Incentives for executives under the plan

The reason behind the application of the golden parachutes plan is the incentives that it can bring to the enterprises. Then what are incentives? In economics, incentive mechanism, also known as “incentive system”, is through a set of rational system to reflect the incentive subject and incentive object interaction. And in human resource management, the incentive mechanism is to mobilize the enthusiasm of the staff with a variety of reward resources. It is no exaggeration that how to effectively implement the incentive mechanism, how to trigger the incentives of staff is a major issue in the business community and one of the most complex ones. One incentive mechanism, if intended to be a success, should be rather specific and need to be customized according to different incentive subject since different status represent different eagerness. As is stated in the Hygiene-Motivator Theory of Herzberg, the key point is to help satisfy a person’s higher-level needs.


Golden parachutes plan is mainly granted to the senior management of the enterprise, such as the general manager or employees at director-level. These personnel contribute a lot to enterprises and they are more concerned about the treatment after they retire. When executives know they can still receive generous and stable pensions after the retirement, they will weigh the opportunity cost of their rush to change the enterprises as listed in the report (making a loss, valuing the business at a low price, hiding assets, transferring profits, or using funds from unknown sources). Instead, they will often in favor of the “parachutes” solution to land safely and hand over the enterprises to the next leader.

Also, the golden parachutes plan takes diversified forms, equity incentive has become an important award under that plan as an effective and long-term method to improve the corporate governance structure and enhance the cohesion. Preparing a rich, stable and long-term golden parachutes plan for the executives not only maximizes the cushion of “parachute jumping” that they face when retire, but also effectively strengthens the corporate loyalty of current employees, full of confidence in the enterprise, sense of belonging and sense of honor as well.


Potential Risks of the Golden Parachutes Plan


3.1 Legality of the clause

Attractive as the golden parachutes plan may be, the legality of this plan has been widely questioned. If not strictly enforced, if the trigger condition of parachute is not set properly, the management level may use its power for personal gains and detriment benefits of the shareholders. Enterprises certainly shall not cross the autonomous boundary to touch the interests of other market subjects or violate the mandatory requirements of administrative regulations. In China, enterprises that have embraced the clause often receive inquiry letter from the regulator, which shows that the “golden parachute” localization still has a long way to go.


3.2 Certainty of the plan

Although it has been emphasized that the golden parachutes plan targets at the executives that contribute a lot to the enterprises. But what exactly is the executive level or how to calculate their contributions? In today’s market economy, many companies will pay executives with “for the contribution of the enterprise” as the yardstick. But how is this “contribution to the enterprise” measured? The design of golden parachutes plan is susceptible to be drawn into such a uncertainty.


3.2 Advice for the incentive plan

In designing the golden parachutes plan, the amount and form of compensation must be open and transparent. It should protect the interests of the company, and inspire the enthusiasm of grassroots staff as well. In terms of content, the specific amount, form should be in accordance with the actual situation, which requires enterprises to have complete and clear systems and performance metrics to standardize payment elements based on job value, competency, performance, and so on. This will also enable the company to have a clear decision-making and lay a good foundation for the future. In terms of security, additional taxes and fees, voting procedures and other restrictions should be imposed on the application. It should be made clear in the articles of association that “Golden Parachute” is a matter of remuneration and a category of autonomy.


Conclusion


“Give them what they need” is one of the golden rule for incentive design, and for those executives who are at a rather high status in the enterprise, want more in addition to the price of labor. Considering that social status dissatisfaction, psychological loss and living conditions after retirement are main concerns that worry them the most, the golden parachutes plan, which suggests a package that pays well and guarantees the long-term security is an effective means to motivate these executive.

Also, it should be noted that each industry, each enterprise has its specificity and in designing the golden parachutes plan, much attention should be focus on the legality and certainty of. Transparency is required to protect the overall interests of the company, characterization is also a must to reach a reasonable amount with clear elements of remuneration and adjustments that can keep pace with the time. Above all, the main purpose of this adjustment is to embody the principle of sharing risks and achievements with enterprises.

To conclude, if designed in accordance with law and with certainty, a stable and long-term golden parachutes plan for the executives can effectively strengthen their corporate loyalty, confidence and sense of honor.



References

Blundell, R., Eric, T. (2016). Retirement incentives and labor supply. Handbook of the Economics of Population Aging, 1(3), 457–566.

Craig, E., John, R., & Reed, S. (2000). Golden parachutes and managerial incentives in corporate acquisitions: evidence from the 1980s and 1990s. Journal of Corporate Finance, 6(1), 215-239.

David, O., & Micah, S. (2014). The totality of change-in-control payments. Journal of Public Economics, 29(2), 75-87.

Kenneth, S., Jeff, S., & Semih, Y. (2007). Ownership structure and golden parachutes: evidence of credible commitment or incentive alignment? Journal of Economics and Finance. 31(3), 368-382.

Olga, M. (2020). Did Soviet elderly employment respond to financial incentives? Evidence from pension reforms. Journal of Public Economics, 1(2), 182-195.

Wen, Z. & Xiao, Y. (2014). On the application of incentive mechanism in enterprise human resource management. Industry Economy, 23(1), 266-269.

Xiong, X. (2013). Research on optimization of Human Resource Compensation Incentive Strategy. Theoretical Investigation, 4(1), 97-100.


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