Research on Application of EVA in Manager Motivation of Listed
|School||Shanxi University of Finance|
|Keywords||EVA Performance Assessment Motivation Mechanism Stock Option|
EVA is defined as an index to assess the true performance of the company. It is also a set of synthesis management system which brings effect to internal aspects of the company. EVA can indicate the resource and approach of wealth creation more easily than traditional financial assessment indexes because of its compensation concept on the cost of capital and its accounting adjustment. How to embody the basic concepts of EVA in management? How to keep creating wealth for stockholders? It is essential to motive the very important persons who have great effect on EVA. The managers who really control the companies are definitely those persons. If we can use EVA to decide managers’reward which is attached directly with the company’operating results based on EVA, the managers will became quasi-owner of the companies. In that case, the managers will be motivated by themselves and make benefits for stockholders on behalf of their benefits.Based on the basic theories of EVA and its current application conditions, this article points out EVA is an effective index to assess the performance in the view of creating the value for the shareholder. By comparing the traditional motivation mechanism with the EVA bonus plan, the article draws a conclusion that the latter can induce the managers to ponder equally like the owners and integrate the managers’ benefits with shareholders’.After the analysis of the present motivation condition in China, the article constructs the motivation mechanism based on EVA -- the union of EVA and stock option. The manager motivation is divided into two stages: One is the bonus computation, the other is the bonus payment. The bonus computation is based on EVA, and the article designs three different bonus models to different types of companies; the bonus payment adopts the method -- the union of cash and stock option, and the article explores the stock option pattern based on EVA. In addition, A Corporation is taken as an example. At last, the article put forward some suggestions that the managers’motivation mechanism based on EVA is put into practice effectively in China.