LexisNexis(TM) Academic - Document
Financial Times (London, England)
July 22, 2005 Friday
Asia Edition 1
SECTION: WORLD NEWS; Pg. 5
LENGTH: 408 words
HEADLINE: China to let companies give workers stocks and shares CORPORATE GOVERNANCE:
BYLINE: By GEOFF DYER
DATELINE: SHANGHAI
BODY:
China is planning to allow listed companies to award stock options and shares to senior executives and other employees, in its latest attempt to improve corporate governance on its scandal-ridden stockmarket.
Companies can award up to 10 per cent of their equity to employees in incentive schemes, according to draft rules circulated by the China Securities Regulatory Commission (CSRC), the stockmarket regulator.
The incentives are the latest in a flurry of announcements from the CSRC aimed at boosting credibility in the market, which has fallen about 45 per cent from its high in 2001. The government hopes stock options and shares will make company boards and senior managers more attentive to the performance of the share price.
The Shanghai composite index, which closed at 1,020.6 points yesterday, is now dangerously close to the 1,000 level which is a psychologically important barrier for the authorities. Having fallen 15 per cent last year, the market is 20 per cent lower so far this year.
In recent weeks the market has been awash with new rumours of a large package of government support for equities, which some analysts say have been circulated to stop the index from falling further.
According to Fraser Howie, Hong Kong-based author of a book on the Chinese stockmarket, listed companies used to award shares to employees but the practice was stopped because of fears it would lead to manipulation of the market and back-door privatisations. Similar fears prompted the government to halt management buyouts of large companies last year.
The draft rules about awards of shares, stock options and warrants apply only to companies that have converted any non-tradeable shares into tradeable stocks.
In a separate initiative aimed at improving corporate governance, the CSRC is pushing companies to unwind their huge holdings of non-tradeable shares, which account for two-thirds of the equity of listed companies and are mostly state-owned.
Cao Fengqi, director of the Finance and Securities Research Center at Beijing University, said stock incentives were an important step.
"Theoretically, they should help in terms of improving corporate governance," he said.
However, he said the Chinese market was not mature enough to price stock options accurately and the incentives would have an impact only in some companies.
"If the governance structure is not good and it is a bad company, then the stock incentive policy will not do much," he said.
LOAD-DATE: July 21, 2005
July 22, 2005 Friday
Asia Edition 1
SECTION: WORLD NEWS; Pg. 5
LENGTH: 408 words
HEADLINE: China to let companies give workers stocks and shares CORPORATE GOVERNANCE:
BYLINE: By GEOFF DYER
DATELINE: SHANGHAI
BODY:
China is planning to allow listed companies to award stock options and shares to senior executives and other employees, in its latest attempt to improve corporate governance on its scandal-ridden stockmarket.
Companies can award up to 10 per cent of their equity to employees in incentive schemes, according to draft rules circulated by the China Securities Regulatory Commission (CSRC), the stockmarket regulator.
The incentives are the latest in a flurry of announcements from the CSRC aimed at boosting credibility in the market, which has fallen about 45 per cent from its high in 2001. The government hopes stock options and shares will make company boards and senior managers more attentive to the performance of the share price.
The Shanghai composite index, which closed at 1,020.6 points yesterday, is now dangerously close to the 1,000 level which is a psychologically important barrier for the authorities. Having fallen 15 per cent last year, the market is 20 per cent lower so far this year.
In recent weeks the market has been awash with new rumours of a large package of government support for equities, which some analysts say have been circulated to stop the index from falling further.
According to Fraser Howie, Hong Kong-based author of a book on the Chinese stockmarket, listed companies used to award shares to employees but the practice was stopped because of fears it would lead to manipulation of the market and back-door privatisations. Similar fears prompted the government to halt management buyouts of large companies last year.
The draft rules about awards of shares, stock options and warrants apply only to companies that have converted any non-tradeable shares into tradeable stocks.
In a separate initiative aimed at improving corporate governance, the CSRC is pushing companies to unwind their huge holdings of non-tradeable shares, which account for two-thirds of the equity of listed companies and are mostly state-owned.
Cao Fengqi, director of the Finance and Securities Research Center at Beijing University, said stock incentives were an important step.
"Theoretically, they should help in terms of improving corporate governance," he said.
However, he said the Chinese market was not mature enough to price stock options accurately and the incentives would have an impact only in some companies.
"If the governance structure is not good and it is a bad company, then the stock incentive policy will not do much," he said.
LOAD-DATE: July 21, 2005
posted by Eastlaw at Friday, July 22, 2005
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