(Greenwich, 9/25/2006) While we are whining about stock option scandals and tying magers up in Sarbanes-Oxley knots Chinese companies are discovering the magic of incentives. Bank of China (BOC) and China Construction Bank (CCB), two of China’s top four commercial banks, will initiate employee stock ownership plans this year as part of their employee incentive programmes. BOC’s shareholders already approved a stock appreciation rights policy for the management team (secret code for stock options). Regulators support the idea. You can read the story by clicking here.
According to a CCB press release:
The implementation of such plans is to increase the bank’s cohesion, to harmonize benefits for employees and shareholders, and to reduce the bank’s operational risks. We expect to build up our core competitiveness by attracting more talent and improving innovation through the employee incentive programmes.
Sound fammiliar?
CCB will allow its employees to hold 1 to 2 per cent of its total shares, which means each staff member will be able to buy 52,000 yuan (US$6,500) worth of stocks on average, according to the bank’s current market value on the Hong Kong stock exchange. The 300,000 employees will be able to hold around 4.5 billion shares, with a total market value of HK$15 billion (US$1.95 billion).
In May, Zhou Xiaochuan, governor of the People’s Bank of China, encouraged State-owned financial institutions to adopt employee stock ownership plans for the first time. “The employee stock ownership plan is an important part of financial institutions’ joint stock reform,” Zhou said earlier.
JR
Dear Dr. Rutledge,
It’s my first time to leave comments on your blog, although I have read several times:)
I like your part on China through your expert eyes, I’m gaining confidence for my motherland’s future development.
Although I don’t understand all of the economic things, I am much interested. I really learn a lot from your articles.
Yes, changes take place every moment in China. I found recently that banks are competing for issuing credit cards to the public. Even those fresh workers like me can have one or more. The requirements for application are not complicated and high as before. we are on the step for globalization, I wonder it’s cost-effective for me to have them and use them in my daily expense.
John –
Last week at the TeleCONSENSUS forum you said that the regulatory environment for stocks in China is pretty weak. How do you feel this will impact stock option grants as more companies incorporate them? ‘
Sean
Sean,
You are right to ask the question. Investors whould look carefully to make sure options are used properly. So far there have been few issues but I like the idea of ESOPS in Chinese companies, where the disclosure looks pretty good.
John
Dr. Rutledge, it’s my first time to leave comments on your blog, although I have read them several times! xixi, Maybe as a young greenhand girl on work, it’s a little difficult to understand all of the economic thing, but I’m much interested.
I particularly like your part on China. After reading, I can feel a kind of confidence for my motherland’s future development, thank you for your analysis and support.
Yeah, there always exist changes in chinese daily life. For example, recently I found so many banks began the campaign of sending credit cards toward the public. and the requirement for application is not as complicated and high as before. Even the fresh worker like me can have one or more. I wonder if it is cost-effective for me to have one and use it in my daily expense. hehe
It’s pleasure to taik with you.
Moya
Dear Moya,
Thank you very much for your comment. I believe you will see very fast development in China’s financial services industry over the next year. Be careful with the credit cards, though.
Thanks for reading and invite your friends sto subscribe and write comments as well.
John