Equity Incentive Target is too Low Sea Horse Car Exercise Equals Money

Listed companies that have launched equity incentive plans have concentrated on small and medium-sized boards and GEM boards in recent years, and most of them have just been listed. Haima Motors has been listed for 17 years. It is only rare that equity incentives have been introduced. The reporter conducted a trial based on the conditions of the draft of the equity incentive plan and the financial data of Haima Motor over the years, and found that the goal of performance evaluation set by the equity incentive draft was too low, and once the target achieved a successful exercise, the related equity incentive fees may be The company's operations have a greater impact.

Assessment Targeting ROE and Net Profit Growth Incentive Target is Low On November 2nd, Haima Motor (000572) announced that the company plans to formulate an equity incentive plan and grant stock options to the company’s financial director and director secretaries. The draft equity incentive plan announced at the same time shows that the company intends to grant 70.85 million shares of stock options, representing approximately 4.31% of the total share capital; the option exercise price is 4.42 yuan, which is taken from the company on the 1st trading day before the draft announcement date. The higher of the stock's closing price and the average closing price of the company's stock within 30 trading days prior to the announcement of the draft plan; the stock source of the stock incentive plan is the company's direct issuance of stocks to the incentive objects; the company's stock options will be transferred within the validity period. The number of stock options and the total number of subject stocks involved will be adjusted accordingly in matters such as the increase of share capital, the distribution of dividends, the splitting of stocks, the allotment of shares, or the reduction of stocks.

According to the Haima Motor’s equity incentive plan, the exercise period of the stock incentive is from the third to the fifth year after the grant. The performance assessment target is the weighted average return on net assets and net profit after the company deducts non-recurring profit and loss. Since there are still two months from the end of the year, we assume that the relevant options can be granted before the end of the year. The authorization period T is tentatively set for 2011, and the final calculation will be based on Haima Motor’s financial data over the years. The trial results show that although the company's ROE and net profit (predicted value) after deducting non-recurring gains and losses in 2011 were both improved compared to 2010 and 2009, the company set a target for 2012-2014. The assessment target is still low.

The goal of return on equity is lower than the bank's fixed deposit. The net profit target for the year is lower than the three quarters. As can be seen from Table 2, Haima Motor’s ROE at the highest 2014 target is only 4.1%, which is lower than the The bank deposit rate is 4.4%. In other words, in the most extreme case, after the listed company is liquidated at the book value, taking the remaining net assets to the bank can also get a 4.4% annual yield. Although the net profit target set a three-year continuous growth condition, even the highest 2014 net profit target is only 167.62 million yuan, which is still less than the 2011-1-3 quarter total profit of 174.49 million yuan. Is the management of the company expected to be so pessimistic about its business operations in the coming years? Or is it that drafters are interested in setting such a low threshold to facilitate the exercise of incentives?

The exercise price is much lower than the historical average stock price. Once the exercise fee impact is huge, the stock exercise price set by Haima Motor’s draft incentive plan is 4.42 yuan, which is exactly the closing price on November 2. As long as the stock price does not fall below 4.42 yuan, the option holder can make a profit. Throughout the past two years, Haima Motor's share price has experienced greater volatility, but 4.42 yuan is a fairly low price. The company's stock price was at least 4.08 yuan on September 23, 2011, and the highest price was 8.43 yuan on February 5, 10 years. From the year 10 to date, a total of 440 trading days, the company's closing price of less than 4.42 yuan is only 21 days, accounting for 4.7%. The company's latest 250-day closing average price was 5.71 yuan, and the exercise price was lower than the average annual price of more than two percent.

Due to the lower exercise price, the equity incentive option granted by Haima Motor is quite valuable. The company’s equity incentive plan also gave a total theoretical value of RMB 138,401,600 for 70.85 million shares of stock options, as well as the estimated amount of amortization for the next few years. According to the above conditions, the reporter’s annual amortization of options costs The proportion of the net profit target was calculated. The results show that the highest in 2012, when the amortization option cost accounted for more than 30% of the company’s net profit target, it had a huge impact on the company’s operating results.

Executives have been granted a large amount of option benefits implied internal control risk Haima Motor’s draft equity incentive plan shows that directors, CFO Zhao Shuhua, deputy directors Sun Zhongchun, and Dong Xiaomi Xiao Dan’s three options ranged from 1.2 million to 1.1 million, respectively. 5% of the number of options is calculated based on the ratio of the total price of the options above. The value of the three-person option is 6.4 million yuan. In addition, in addition to setting aside 7 million options for future grants, the remaining 174 key employees shared 60.35 million options, and the per capita option value was 650,000. However, these options can be exercised and embedded value only if the company meets the assessment objectives. In the face of such a big interest temptation, it will inevitably cause people to worry about whether the company will have the risk of internal control such as manipulating profits and studing statements.

On this issue, the reporter learned from a former senior person who once worked for an internationally renowned accounting firm. The person pointed out that because of the long industrial chain of auto companies and the complicated accounting process between relevant business processes, there is a certain amount of room for accounting operations. For example, postponing orders at the end of the year to shipping at the beginning of the next year can postpone the revenue for that year to the second year, so it cannot be ruled out that the company’s senior executives risk tackling the internal control risks of the statements. However, he also stressed that whether the accounting statements are true and fair depends not only on the company’s internal employees but also on the company's risk control mechanism. At the same time, the external auditors also perform corresponding audit procedures. Therefore, it cannot be said that the final operating results of the company will be certain. It is whitewashed.

The choice of the base period or the key Another important factor affecting the options incentive scheme for hippocampal vehicles is the general meeting of shareholders. Because the reference period T set by the company is determined according to the authorization date approved by the general meeting of shareholders, and the reference period determines the specific year of comparison period T-1. If the company can successfully convene a general meeting of shareholders in 2011 and is allowed to grant options, the comparison period is 2010. If the company delays until the next year, the comparison period will be 2011. According to the two-year financial data, it is clear that the 2010 financial data is relatively low. As a comparative period, the assessment goal is easier to complete and it is more beneficial to those who exercise options. Therefore, as soon as possible to convene a general meeting of shareholders and pass this equity incentive program in order to choose a relatively easy reference period, presumably one of the company's main tasks.

Just look at everything on both sides. Behind the profitability of executive options, there is an increase in the cost of corporate options. Has Haima Motor successfully held a shareholders' meeting in the remaining two months? Can the company shareholders pass this option incentive plan? Let us wait and see.