The same is the equity incentive. Why do Xiaomi, Great Wall Motor and Gree present two plot trends？

At the moment when the competition for talents is intensifying, the equity incentive plans of large technology companies are frequently searched.

On June 20th, Gree Electric (000651.SZ) released the first draft of employee stock ownership plan. It is reported that the price of shares repurchased by the employee stock ownership plan is 27.68 yuan/share, which is equivalent to 50% of the average price of shares repurchased by the company’s "Proposal on Repurchase of Some Public Shares", covering a maximum of 12,000 employees.

On July 2nd, Xiaomi Group (01810.HK) announced that its board of directors awarded a total of more than 70 million shares to 3,904 employees according to the share bonus plan. According to the share price of Xiaomi at that time, the value of this share bonus was as high as HK$ 1.8 billion or more. A few days later, it was announced that the first batch of technical experts, middle and high-level core managers and entrepreneurs in the new decade were selected, totaling 122 people, with a reward amount of nearly 2.579 billion yuan and a per capita income of 21.14 million yuan.

However, although the officials announced that they would "send red envelopes" to employees, the equity incentive plans of the two companies are quite different in terms of word of mouth and the direction of the secondary capital market.

Unlike the controversial Gree "half-price" employee stock ownership plan, Xiaomi was envied as "someone else’s company", and many people even left a message "Is Reebs still short of employees?". In the capital market, since the release of the draft equity incentive, Gree Electric’s share price has been ups and downs, and its market value hovers around 300 billion yuan.

Image source: car company official website

In the automobile circle, Great Wall Motor (601633.SH), a leading private automobile company, has an equity incentive plan that is even bigger in scale and intensity. On July 22nd, Great Wall Motor released the 2021 option and restricted stock incentive plan, covering nearly 10,000 incentive targets, involving over 390 million stock options and 34.05 million restricted shares, which is the largest equity incentive plan in its history.

Once the announcement was issued, Great Wall Motor’s share price soared. On July 23rd, Great Wall Motor’s A-share price rose by 7.68% to 54.95 yuan/share, and its total market value exceeded the 500 billion mark, reporting 505.698 billion yuan. In other words, the market value of a trading day rose by over 36 billion yuan.　

Why is the same equity incentive plan, and the plot is so different?

Stock right incentive hides gan Kun

Generally speaking, equity incentive, as one of the most commonly used methods to motivate employees at present, is a long-term incentive mechanism implemented by enterprises to motivate and retain core talents. Equity incentive mainly gives employees some shareholders’ rights and interests through additional conditions, so that they have a sense of ownership, thus forming a community of interests with enterprises, promoting the common growth of enterprises and employees, and helping enterprises achieve the long-term goal of stable development.

However, although they are both equity incentives, the incentive intensity is quite different due to the differences in incentive objects and restrictions of various companies. Some people in the industry said that Gree’s equity incentives focus on management and link management with future performance. The company expects to mobilize the enthusiasm of management and create better performance. The Great Wall and other companies are aimed at the company’s value employees and technical elites, focusing on the binding of their future service time, which is a long-distance running plan.

In fact, as for Gree, according to the draft, although the total number of employees to be involved is no more than 12,000, the maximum number of shares subscribed by Dong Mingzhu, the chairman and president of the company, is 30 million shares, and the maximum amount of proposed capital contribution is 830 million yuan, accounting for 27.68% of the plan. Based on its share price at that time, the increase is expected to make Dong Mingzhu earn 780 million yuan.

At the same time, there are still more controversial issues, that is, there are many conditions for employees to buy 50% off shares, sell them or get profits in the plan. It is reported that after purchasing 50% off shares, ordinary employees can’t exercise the corresponding voting rights according to their own wishes, and they need to retire to continue to enjoy the corresponding share income, and then they can sell shares after retirement.

Immediately, the draft caused an uproar. Some netizens even bluntly said, "Encourage employees not to object, and I don’t want to say 50% off the price, but Dong Mingzhu, who is about to retire, accounts for one-third. Who is this motivating?" The day after the draft employee stock ownership plan was released, Gree Electric closed at 51.11 yuan/share, the lowest in the year. As of that day, the total market value of Gree Electric had dropped by 65.1 billion yuan compared with the beginning of the year.

Image source: car company official website

On the other hand, Great Wall Motor, in terms of scale, its two-phase equity incentive plan has accumulated over 10,000 person-times, covering 50% of its core employees and achieving full coverage of all job levels, business fields and key positions.

In terms of strength, compared with the 50% discount of Gree’s participating employees, the employees who are motivated by Great Wall can buy more shares at least 30% discount. According to the announcement on the 22nd, it is planned to grant 43.184 million restricted shares to the incentive object, accounting for 0.469% of the total shares of the company at the time of the announcement of the draft incentive plan. The grant price of the restricted shares granted for the first time in the incentive plan is 16.78 yuan/share. This price is equivalent to 30% of the latest closing price of A shares of Great Wall Motor, in other words, it is equivalent to about 30% discount on shares.

At the same time, Great Wall Motor shares have high growth. Take last year’s equity incentive plan as an example. According to the announcement of Great Wall Motor in April this year, 23,998,700 restricted shares of the company were listed and circulated on the 27th of that month, accounting for 0.26% of the company’s total share capital, involving a total of 276 incentive targets. Based on the estimation of the A-share price of Great Wall Motor at that time, the floating profit of 276 employees was more than 7 times.　

And such a plan of "real money and silver" to motivate employees not only won a good reputation, but also won unanimous praise from the capital market.

In fact, after the release of the draft incentive plan with greater strength, scale and wider benefits on May 25 this year, Great Wall Motor’s share price once again "sat on the rocket". As of July 23, the share price rose by 93.18% compared with that day, and the total market value rose by more than 181.3 billion yuan in less than two months.

Accelerate the transformation to a global technology travel company

"People are the most important resource of an enterprise. It is employees who create performance, and the system cannot replace the active role of people. " Peter drucker, the father of modern management, once said.

In the industry’s view, equity incentive is not only "interest binding" and "interest incentive", but also plays a role in every level of talent demand: first, it can enable employees to realize their self-worth and gain a sense of accomplishment in making progress; Secondly, gain emotional respect and a sense of belonging and security; Finally, it is the financial return, which can play a comprehensive role in all aspects, and the effect of equity incentive will be the greatest.

The Great Wall’s equity incentive is a perfect combination of material and spiritual incentives. Judging from the performance assessment requirements of Great Wall Incentive Plan, the exercise assessment year of the incentive plan is three fiscal years from 2021 to 2023, and there are certain requirements for sales volume and net profit. Among them, the third exercise period, that is, the company’s automobile sales in 2023 are not less than 2.8 million, and the net profit in 2023 is not less than 11.5 billion yuan. Although it is challenging, it shows Great Wall’s determination to win the future.

Image source: car company official website

Xu Hui, the director-general of Great Wall Motor, recently said at the shareholders’ meeting that this goal is not only based on short-term goals, but also on the challenges of the market and the future development of the industry, and also based on the resources that Great Wall Motor now has, which is a comprehensive consideration. Although the goal is challenging, the company believes that it can still be achieved.

At the same time, the equity incentive plan comparable to Xiaomi further proves the scientific and technological attributes of Great Wall Motor. In fact, equity incentives have increasingly become the norm for technology companies, and under the circumstance that technology giants have cut into the intelligent and electrochemical track, the demand for talents in the fields of electrification, intelligence and autonomous driving has also surged. According to the data report of the first quarter of the recruitment, new energy vehicles are the fastest growing areas of new jobs, with a year-on-year increase of 103%.

Obviously, in the face of a great change in the automobile industry in the past century, only by mastering the core talents can we master the core competitiveness in the future. For listed companies, adopting equity incentives can make employees burst into a strong driving force in a short time, especially for Great Wall Motor, which is running forward on the road of globalization, it will undoubtedly convey stronger confidence in coping with the future internally and externally.

It is understood that the purpose of Great Wall Motor’s incentive plan is to further establish and improve the operating mechanism, establish and improve the incentive and restraint mechanism of the company and its senior managers, middle managers and core technology (business) backbones, form a "community of interests", effectively promote the transformation of employees from "migrant workers" to "partners", and turn "doing work" into "doing business", thus promoting Great Wall Motor to be sustained, steady and rapid in many ways.

In recent years, Great Wall Motor has launched "Ten Thousand Talents Plan" and "Global Talents Living Water Plan" in order to create a fair power and responsibility distribution mechanism, give employees diversified growth opportunities, and make enterprises and individuals more energetic and fighting capacity.

According to the 2025 strategy released by Great Wall Motor a few days ago, the cumulative R&D investment of Great Wall Motor will reach 100 billion yuan in the next five years. By 2023, the number of R&D personnel worldwide will double from the existing 15,000 to 30,000, including 10,000 software developers.

Image source: car company official website

After doing a good job in talent reserve and training, and preparing enough ammunition, Great Wall Motor is accelerating its transformation into a global technology travel company. It is reported that based on the new positioning of "global layout", "R&D investment", "enterprise transformation" and "user operation", Great Wall Motor will carry out comprehensive and thorough innovation and transformation, and achieve the goal of global annual sales of 4 million vehicles in 2025, of which 80% will be new energy vehicles, with operating income exceeding 600 billion yuan. Obviously, Great Wall Motor has a promising future.