Theories and Practices on Stock-based Incentives

Modern corporate theories and practical experiences in developed markets have proved that the stock based incentives will bring the managers into full play, and will be identical with long benefits of shareholders, managers and corporate. It will also improve the structures of corporate governance by reducing the agency cost. Both reform of ownership structure and revised law and policies, including revised company law and some accounting standards will increase the practices of stock based incentives in China. This paper reviewed the economics background and logical principles emerging the stock based incentives and concluded the ways of practice and reform.