Incentives And Executive Rewards Tightened

By Wang Yanlin  |   2008-7-3  |     NEWSPAPER EDITION

CHINA will further strengthen the regulation of share incentive schemes and raise the requirements for giving stock options to executives of state-owned companies.

The earnings target of a company wanting to implement a share incentive scheme must be at least the average of the company's performance in the past three years, as well as the industry's average.

A supplementary rule issued by the Stated-owned Assets Supervision and Administration Commission also requires the value of stock options for executives of domestically listed firms not exceed 40 percent of total payments.

For mainland companies incorporated in overseas markets, the limit is set at 50 percent.

Listed firms must regularly review performance and meet the target set when executives receive the options. They can't sell or transfer the options within two years.

The latest rule comes after the stock regulator unveiled a rule earlier this year to prevent executives making improper gains from share incentive schemes.

The earlier rule banned listed firms from conducting new stock issues, asset injections or bond offerings within 30 days after having announced an incentive plan.