CITIC Securities Co, one of the country's only two listed brokerages, yesterday unveiled its long-awaited stock option incentive scheme for management.

 

The Beijing-based brokerage plans to award its chairman, Wang Dongming, and other senior managers 22.16 million shares, which they could buy at the net asset value of 3.546 yuan (44 US cents), or a 73-per-cent discount to yesterday's market price of 13.29 yuan (US$1.66), the company said in a statement to the Shanghai Stock Exchange yesterday.

 

Under the scheme Wang alone will receive 800,000 shares. Seven other senior managers will be granted 520,000 shares each.

 

But a five-year lock-up period will be imposed on managers who buy the stocks, meaning they have to hold the stocks for five years before they can sell them, the brokerage said in the statement.

 

The proceeds from the stock sale will be distributed between the company and managers in accordance with the plan approved by the Ministry of Finance, the firm said.

 

CITIC Securities, the country's leading brokerage, saw its first-half net income surge nearly 10-fold to 627.9 million yuan (US$78.5 million) from 66.2 million yuan (US$8.3 million) a year earlier, thanks to this year's industry-wide recovery.

 

Its share price has almost tripled this year. It closed at 13.29 yuan (US$1.66) yesterday, down 2.49 per cent.

 

Driven by the rebounding stock market, the domestic securities industry, which has operated in the red over the past four years, has reversed its course this year, making a profit of 12.3 billion yuan (US$1.55 billion) in the first half.

 

China's stock market, mired in a five-year slump, has staged an impressive rebound since the beginning of the year, bouncing back more than 60 per cent from an eight-year low in July last year.

 

The end of a one-year ban on shares sales in May further boosted revenue for securities brokerages.

 

CITIC Securities underwrote several big initial public offerings (IPO) in the country this year, such as Bank of China's 20 billion yuan (US$2.5 billion) Shanghai IPO in June.

 

The company is also assisting with the share sales of the Industrial and Commercial Bank of China, China Life Insurance Co and the Nanjing City Commercial Bank Co.

 

The government is encouraging public companies and State-owned firms to consider stock options incentive plans to boost corporate governance and performance.

 

"Granting stock options is a sound tool to motivate management to improve their corporate performance as they make corporate interests and their personal interests overlap," said Liu Jipeng, a company studies expert.

 

"It also makes them less inclined to indulge in short-term business acts as their compensation is linked to the company's long-term business performance," Liu said.

 

The State-owned Assets Supervision and Administration Commission, which supervises the country's 169 leading State-owned firms, plans to release an incentive plan rule soon.

 

(China Daily September 8, 2006)