More Companies in Hong Kong and China Use Long-Term Incentives to Reinforce Alignment and Promote Partnership

October 11, 20162:38 pm593 views

Long-term incentives have increased in Hong Kong and China to reinforce alignment of interest and partnership, according to independent management consulting firm, Pretium Partners Asia Ltd.

Long-Term Incentive Practices Survey (2016) for General Industries shows the prevalence of additional long-term incentives has jumped from 67% to 70%. The relaxation of regulatory requirements has encouraged more Chinese companies to adopt share based incentives.

The prevalence for Technology, Media and Telecommunication companies has reached 100%. By increasing popularity of the partnership model which has a rippling effect on other industries, more consumer goods companies, transport and utilities institutions and financial services companies have launched long-term incentives.

The survey examines the features of 204 long-term incentive plans in 100 international and Asian companies across industries. This includes deferred bonus plans and additional long-term incentive plans in the United States, the United Kingdom, Europe, Hong Kong, China, Singapore, Malaysia and Australia.

Lower prevalence of long-term incentives is found in Hong Kong and China (64%) when compared to other regions (70% and above).

“With the loosening of regulatory restrictions and the rising popularity of the partnership model, more Chinese and Hong Kong companies are exploring long-term incentives as a means for interest alignment and talent retention, the gap will be closing soon”, said May Poon, Managing Partner of Pretium.

All the Technology, Media and Telecommunication companies (100%) adopt long-term incentives to reinforce interest alignment between the companies and the employees.

Some of them have served as role models in using long-term incentives to promote partnership. This trend has a rippling effect on other industries such as Consumer Goods (100%) and Financial Services (70%).

“Consumer Goods and Financial Services companies are adversely affected by the economic environment and new business model, but long-term incentives can provide a way out in the midst of uncertainties and business transformation by promoting partnership and interest alignment. Long-term incentives emphasize pay-for-performance, alignment of interest and meaningful ownership, thus performance shares and shareholding requirements can motivate employees who are on the same boat to drive behaviours towards business objectives,” Poon added.

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