Equity applies big data to make a contrast, from the perspective of company management, between the real environment and legislation for equity incentives of listed companies, and to give concrete solution for non-listed companies’ equity incentives. This book takes an outstanding place in the relatively poor and empty academic area of equity incentives.

Mr. Song is an excellent and experienced lawyer in company law and tax law who has written and published a handful of works during the past years. I can feel the power of his accumulated strength in law and a persistent craftsmanship spirit. Equity itself provides a brand new view for lawyers and entrepreneurs.

The fast development of technology makes sharing possible and turns it into an internal need. As a result, whether your company is listed or non-listed, there is one thing with no doubt. That is the right solution for equity incentives. This book gives reliable answers for all your questions.

Mr. Song pays all his attention to study company management and persists in his work for years. In the era of using wealth as incentive for intelligence, this book uses ideas of law, management, and psychology comprehensively to rethink the project of how to stimulate employees’ vitality and creativity.

Equity is a crystallization of its author’s years of experiences in both company law and tax law. Analyzing effects and risks of equity incentives in non-listed companies in understandable words, this book contains valuable advice for businesses wanting to apply equity incentives.

In a company, what every employee wants is: "Win promotion and salary increase. Take up the position as general manager and then CEO. Marry the girl or boy in one’s dream." For those CEOs who had the same wished before, they care nothing more than how to maximum employees’ potentials with the cheapest and easiest way. Therefore, the so-called company is just a place where the boss and the employees "exploit" each other.

Committed to eliminating this "original sin", equity incentives comes into existence. On the one hand, employees get a sense of belonging in company. On the other hand, the boss sees higher profits along with higher work efficiency and higher quality. Win-win, isn’t it wonderful?

Therefore, in this era of nationwide entrepreneurship, equity incentives seems to be on the mouth of every boss, and more and more people start to pay attention to the research on equity incentives. There is such a book, with its title simple and eye-catching, and in just a few words, having its own banner: Redefined Equity Incentives! Of course, the author doesn't forget to add a limit to the slogan - the object of redefining are non-listed companies.

Note the signature of this book: Shanghai Song Haijia Law Firm (now Shanghai Song and Gu Law Firm).

Lawyers talk about equity incentives - isn’t it nonsense?

Lawyers and equity incentives? Isn’t the distance between these two words a little bit too far? Search these two keywords on the Internet, and the first result pops out is: "Equity incentives programs directed by lawyers are basically nonsense." The author of this article believes that "Management contains profound knowledge, with one half about science and the other half about art. Lawyers, as layman, should not intervene in equity incentives.” In a sharp contrast to this, one of the core concepts of this book is: “How could an equity incentive scheme work out smoothly without a lawyer’s instructions?!” But this contrast just explains a fact that equity incentives are not just management or legal issues. Regardless of which party you support, it is untenable to attribute equity incentives to a single discipline. The book breaks through the limitations of the lawyer profession – this is a book that considers equity incentives of non-listed companies from multiple perspectives such as management, psychology, and law.

Equity incentives: Law + Business Management, Case + Theory

Equity incentives span the field of law and management, and this book perfectly combines these two concepts.

For most people, the world after primary school is no longer either black or white. Everything in the world has its own advantages and disadvantages. Only by looking at things from multiple angles can you understand it thoroughly. That’s why analysis integrating cases, management theories and regulations has become one of the highlights in this book. For example, when referring to the core legal issues of equity incentives, the author uses the case of “Real Kung Fu” as an example in the book. By case analysis, a boring and abstract academic concept can be presented in the most intuitive way, and readers can get a deeper impression on similar cases which they can use for references when they meet a similar situation.

In the process of analysis, the author first puts forward the idea that “Incorrect corporate governance is a key factor in triggering shareholder disputes”. From the perspective of management, this view explains in detail that regulation of information disclosure, rules of procedure, and exit mechanism are prerequisites for the implementation of equity incentives in companies. For once again, it reminds readers to use management theories professionally and to retain employees with a considerable company system.

At the same time, the author also constructs a legal framework by using words like “a case linked with multiple cases” and “criminal responsibility” to emphasize the importance of preventing and controlling shareholder disputes in equity incentives. Using multi-angle analysis, the author explains the essence of equity incentives: the so-called equity incentives is just putting the crystallization of human resources management into a framework made of law and integrating both in an artistic way. Only by this can this system play its biggest role.

Listed company? Non-listed company?

Going back to the beginning where I said that the book has a manner of great speaking, claiming to redefine the equity incentives of non-listed companies. In fact, the author really makes it. The so-called "redefining" is the use of an unique multi-angle analysis. In addition, the author also explains the definition of “non-listed company”.

From the very beginning of the book, the author emphasizes the difference between listed companies and non-listed companies. For example, characters based on shareholders in non-listed companies plays a more important role than characters based on capital in listed companies. In the process of analyzing the specific implementation of equity incentives, the author gives corresponding opinions based on these characteristics of non-listed companies, instead of copying the listed company model in a general way. For example, when referring to the allocation of incentive objects, the author clearly states that it is not allowed to be rigidly attached to the rule in list company--"The total amount of incentive shall not exceed 10%, and a single incentive object shall not obtain more than 1% of equity". Instead, the rule should be "No maximum, no minimum." At the same time, it also clarifies the reasons: considering that the essence of equity incentives is the trade of human capital, the transaction can only be completed bewteen buyer and seller, not the boss's wishful thinking. Such an inspiring idea is not inspiring for its novelty, but for its rareness as one of few that is really written from the perspective of a non-listed company. Based on the flexibility and diversified characteristics of non-listed companies, it’s natural for managers to increase the incentives for professional managers to enhance their sense of security. This is understandable and reasonable. Compared with other books of the same type, the theme and purpose of this book is clearer, as it refines problems to the characteristics of non-listed companies, endowing the book with unique value.

A book with a "good figure"

In addition to the innovation and originality of the content, the structure of the book also helps establish its prominence among similar books.

When looking at a person, what most people first see is not his facial features and temperament but his height, size, and body proportion. A book is also like this. Only with a good structure can the reader be retained to savor its "features" and "temperament".

Redefined Equity Incentives: How to reward Non-Listed Companies Employees begins with an introduction of basic concepts of non-listed companies, and gradually leads them into specific situations, following an order from the shallow to the deep. Based on this sequence, the whole book consists of headline, subtitle and minute title. Although it sounds like too many titles, it subdivides the analyzed content and clears the way for readers. For example, “Adjustment and risk of equity incentives for non-listed companies” is a very big topic, which includes who can repurchase equity, conditions of repurchasing equity, prices of repurchasing equity, and so on. If you follow the traditional segmented writing, the reader may not have the patience to read all the intensive readings, and may have difficulties in finding the exact part quickly. Therefore, the book is subdivided into a number of representative sub-headings under a bigger headline, such as “Incentive shareholders’ loyalty and diligence obligations, and their qualifications”, which explains in detail if the incentive object fails to fulfill its obligations, it will have an impact on their qualification as a shareholder. With such a structure, the writing doesn’t deviate from the headline discussion about the risk adjustment of equity incentives, while perfectly taking care of the subtitles. Besides, when it comes to the cited laws and regulations, the author deliberately arranges the words into special fonts and presents them to the reader in the form of Bullet Points. This is to avoid long narrative by refining the essence at the same time highlighting the points. Overall, the book's concise and clear structure fits in its features as a reference book, providing readers with a book that can be freely viewed like a dictionary.

A book with "good temperament"

Redefined Equity Incentives: How to reward Non-Listed Companies Employees is more than a reference book. The semi-formal language style in the book adds fun to reading. For example, when it comes to the choice of motivational objects, the author first illuminates his point of view in an academic tone: the choice of motivational objects is something that cannot be quantified. In order to explain this abstract idea, the author gives a "three-points" principle that he summed up after being inspired by the professor, using an entire page for the example. Then he applies the analogy method to embody the "three-points" principle into the issue of mate selection. Although it does not explain the idea directly, it makes readers realize this truth from easy-to-understand examples, and tells a truth that there are scientific principles in simple experiences.

In addition, the author tries to avoid blunt academic vocabulary in the selection of words, and wants to make the article vivid without losing the seriousness of academic books. When he mentions the rate of disputes among shareholders of non-listed companies, he quotes a folk saying--“You know he will become a general or a thief from the way he acts in a young age”-- to describe the development status of non-listed companies, cooperating with the rigorous big data chart of shareholder disputes so that it reserves concise and professional in the same context. However, it is this combination that allows readers to understand the legal risks faced by startups in implementing equity incentives in a common language, and also supports the quoted proverbs with data. Readers can quickly understand that during the first three years of non-listed companies, to prevent the occurrence of shareholder disputes is of vital importance for implementing equity incentives. The language style is the core of a book. The style of this book is like a humorous old professor who can talk a joke containing far-reaching meaning at any time.

Just for decoration? Talking about practicability of this book

Suppose that you are a human resources expert, when introducing equity incentives to customers, you may tell them that equity incentives is a tool to solve the agency costs of professional managers. It's like a pair of gold handcuffs that can meet the physical and psychological needs of employees, giving them a sense of security. But things will never turn out as you wish; all incidents will be accompanied by conflicts and disputes such as the "derailment" of company executives, or "betrayal" of departing employees. Then as an expert in human resources, what is your golden advice?

As a lawyer, the author gives a definite answer: the essence of equity incentive law is conditional equity transfer or capital increase and share expansion. The core issue of equity incentive is to prevent and control shareholder disputes. Just as the book compares the shareholder relationship to marriage, it is important for the young couple to maintain their relationship, but now there are more and more people willing to sign an unromantic "prenuptial agreement", which illustrates that the soundness of the exit mechanism is one of the guarantees of security in marriage life. So is the company. Examples like the "Real Kung Fu", “Cnlight” are all alarm to the reader: in the face of money, personal emotions, and company interests will all make concessions. Now the conditional equity transfer or capital increase and share expansion agreement has become an effective weapon to guide the behavior of all parties, avoiding disputes to the maximum extent. This is what people often say "the dynamic adjustment mechanism of equity incentives."

After all the aspects about the book, I want to mention a comment I saw on the Internet: "This book is more theoretical than operational." So, what is the actual situation?

From a legal point of view, the author has answered this question – designing an equity incentive plan is to draft a "conditional equity transfer agreement or a capital increase and share expansion agreement". As mentioned above, the equity incentive program also involves human resources management, organizational behavior, psychology and many other disciplines. We all know that management is "abstract fantasy." Before you understand the psychological needs of potential incentives, even if there are hand-to-hand instructions on drafting a perfect equity transfer or capital increase and share expansion agreement, nobody can guarantee its effectiveness. The law can tell us how to handle the marriage procedures, but can't show us how to develop a love relationship. Equity incentives must have a "love" process. Problems like how to choose the incentive object, how much equity to grant, the exercise price, and what time to authorize are not what law can answer directly. It needs to be practiced, negotiated, and evaluated. This is a complicated and tricky problem with no certain rules. In my opinion, to inspire and lead readers of thinking rightly is the first step of learning. As the book says, "Equity incentive plan has to go through three stages of 'love, marriage, and married life'. As for how to choose objects, I believe that every lawyer and entrepreneur will have their own operation manual. 

A good book brings more than immediate or future benefits, and more importantly, it leads people to think deeply. The opening and conclusion words of this book are very intriguing: "Is equity incentives a necessity for every company?""Use equity incentives carefully! Equity incentives are the most costly and risky incentive tools. A smile, a compliment, or a challenging mission--these are all immediate low-cost incentives which are most easily overlooked by managers."