Analysis of the Impact of Equity Incentives on Corporate Performance

Abstract

Equity incentive is a long-term incentive mechanism implemented by enterprises to motivate and retain core talents, and is one of the most commonly used methods to motivate employees. Equity incentives have been developed from the beginning of the twentieth century to the present day to form a relatively complete and mature system, and their dynamic evolution and key role in corporate governance (employee loyalty), executive compensation, and investor decision-making make them of far-reaching research significance. Also, the equity incentives of enterprises play a crucial role in their development. The purpose of this paper is to comprehensively summarize and analyze the development and classification of these incentives. In addition, this paper focuses on the equity incentive policies of Tesla and Xiaomi and explores how and why incentivizing two target groups, namely executives and employees, affects corporate performance, as well as making a side-by-side comparison, and gives some suggestions for future equity incentives.