Red Weekly Special Contributor | Zhang Baoliang
The essence of the equity structure is the ownership of the company’s property rights, just like the roots of a big tree and the foundation of a tall building. “Capital + operator + labor” is the foundation of the enterprise mechanism and the “three treasures” of running an enterprise.
In our country, through equity restructuring, the “business community” of the “three treasures” of enterprises is established, a mid-to-long-term incentive platform is created, and employees’ creativity is stimulated. There are good company samples in both non-listed companies and listed companies for value investors to learn and refer to. Non-listed companies such as Huawei, listed companies such as Wanhua Chemical. Wanhua’s shareholding structure includes the full support of the state, the loyalty of management and employees, the assistance of international strategic investment, and the help of public shareholders. Many parties have worked together and each has obtained considerable returns.
Establish a “community of business”
Stimulate employee creativity with medium and long-term incentive platforms
Only by properly handling the distribution relationship among the owners, operators and laborers can the enterprise develop well. The reason why Shanxi merchants in the Qing Dynasty were so popular was the advanced mechanism. For example, the year-end bonus was divided into 1/3, one part went to the owner, one part went to the accountant and the shopkeeper, and one part went to the assistant.
Take the modern enterprise Huawei as an example. Almost all employees of the company hold shares, but the company has well combined equity with ability, contribution and years of service. The helm Ren Zhengfei only has 1.01% of the shares, and Huawei’s labor union joint-stock company holds 98.99% of equity. The latter is a virtual restricted stock, which is a special stock granted to employees by the labor union of Huawei Investment Holding Co., Ltd. Number of shares held.
Employees who own virtual shares can get a certain percentage of dividends and the company’s net asset appreciation corresponding to the virtual shares, but they have no ownership, voting rights, and shares cannot be transferred or sold. When an employee leaves the company, the trade union committee of Huawei Investment Holdings Co., Ltd. will repurchase the shares, and the repurchased shares will be converted into reserved shares, and the proportion of the repurchase will be determined according to the difference in the number of years. take the stock). In the wealth created by Huawei, the owner only owns one share, and the technical backbone, business backbone and employees account for five shares, and the five shares must be taken by the technical backbone, business backbone and employees before the owner gets the last share. , which is the so-called “gathering of wealth and people”, distributing more of the company’s wealth to employees.
It can be said that Ren Zhengfei’s entrepreneurial spirit and equity mechanism have created Huawei’s great success. Corporate wealth is inseparable from the investment of capital, as well as the efforts of managers and the creation of employees. Therefore, when a company distributes wealth, it must balance the three. It must consider the owner and allow the owner to obtain a return that is much higher than the average social profit. Only then will the owner increase investment and expand reproduction; Excellent managers, let them do their best to do business well, grasp market opportunities, make correct decisions, and run the company well; they must also consider the employees, because the wealth of the company is created through their labor. To achieve a good balance between these three, there must be a sharing mechanism.
Employee stock ownership + management stock plan + technology dividends
To achieve a win-win situation
The listed company Wanhua Chemical has transformed from a small factory producing polyurethane and synthetic leather into a multinational chemical company with outstanding profits, namely China’s “BASF”. The reform of the equity mechanism has also played a major role. On the premise of maintaining the largest state-owned shareholder and controlling power, the company absorbs management backbones, technical backbones, business backbones and other employees as shareholders, boldly introduces foreign capital and private capital, builds a new equity structure, and implements independent R&D and innovation strategies for Wanhua Chemical A solid foundation has been laid.
Figure 1 is a shareholding structure diagram of Wanhua Chemical. After the equity penetration, Guofeng Investment is held 90% by the Yantai State-owned Assets Supervision and Administration Commission, and 10% by the Shandong Provincial Department of Finance. Zhongcheng Investment and Zhongkaixin are shareholding platforms for employees and management. Prime Partner International Limited (Prime Partner International Limited) is an international strategic investor and an ally of Wanhua in the acquisition of Hungarian BC Company. Hungarian BC Company was originally the eighth largest MDI manufacturer in the world. Dejie Huitong invested in coal mine resources. The author learned through an enterprise search that the legal person of Beijing Dejie Huitong Technology Co., Ltd. is Jinanna. The 2022 annual report of Wanhua Chemical disclosed that Jinanna holds 0.68% of listed companies. Hua Chemical stock. The Dejie Huitong found by Qicha is currently a technology company. It has several lawsuits with Wanhua Industrial. Later, the author called Wanhua Chemical to confirm that it obtained the equity by using coal mine resources to increase the capital of the parent company of the listed company.
Looking back at the reform of Wanhua Chemical, there are two main measures: one is employee stock ownership. The equity structure of Wanhua Industrial Park is 20% employee shares, 21.6% state-owned shares, and the rest are retail investors. , The second is scientific and technological dividends. As long as technicians invent something, they can get 15% of the benefits created, for a total of 5 years. This is a reward of real money. In 2018, Wanhua Chemical achieved a revenue of more than 60 billion yuan and generated a profit of 16 billion yuan. In 2019, due to the decline in product prices, the profit decreased slightly, but there was also a profit of more than 10 billion yuan.
Then focus on the employee and management shareholding platforms Zhongcheng Investment and Zhongkaixin. Yantai Zhongcheng Investment is an individual stock for employees. It was launched in 1994 before it was listed. At that time, the company was still losing money and the benefits were not good. Millions of dollars. Ningbo Zhongkaixin is held by the management, and it was launched in 2006 after its listing. Although the benefits have been greatly improved, it is very rare to be able to hold on to it for 16 years. It can also be called a model of value investment. This huge return It was their perseverance and wisdom that deserved their rewards. At the same time, they also understood why the company was able to reform with determination, improve operations, and continue to improve, because the management and employees really put their wealth on it. Moreover, the core management team members of the company have worked in Wanhua Chemical for many years and have been promoted step by step. They all have a very deep understanding of the industry.
Wanhua Chemical’s employee stock ownership is different from general employee stock ownership, but similar to Huawei’s virtual restricted stock. Employee stock ownership does not quantify these shares to everyone, but serves as a pool of funds held by the holding company For stocks, employees have shares in the holding company, and the holding company only distributes cash dividends to everyone every year. If employee stock ownership is quantified to individuals, everyone will sell when the stock price is high, thus losing the incentive effect. This kind of equity incentive system for employee stock ownership is superior to general equity incentives. It can motivate corporate employees for a long time, rather than selling them for cash in order to achieve a short-term incentive goal, which is more in line with the company’s long-term strategic plan.
In addition, according to Wanhua’s 2022 annual report, Zhongcheng Investment, Zhongkaixin, and Synthetic International’s shareholdings are all pledged, and the shareholding pledge rates are 2.8%, 17%, and 50% respectively. Moreover, Synthetic International and Dejie Huitong will continue to reduce their holdings after the restricted shares are lifted on March 23, 2022. The 2022 annual report discloses: Synthetic International has reduced its holdings of 140 million shares, and its shareholding ratio has dropped from 10.7% to 6.07%. Huitong reduced its holdings by 41 million shares, and its shareholding ratio dropped from 2.23% to 0.93%.
“Heavily warehoused” highly educated young people
Salary is lower than international competitors
The future competitive advantage of the chemical industry lies in the “engineer bonus”. The author used to work in the mobile communication industry and found that this is very similar to Huawei. Huawei’s R&D advantage lies in the “engineer bonus”.
The popularization of higher education in my country has trained a large number of engineers, and the salary is far lower than that of European and American companies. In 2021, Wanhua’s per capita salary will be 321,400 (not low in China). According to the calculation of CICC, Wanhua’s international competitor Covestro With a per capita salary of 128,000 euros, Wanhua is lower than its competitors. This is very similar to Huawei in the communication equipment industry. In the competition between Huawei and European and American communication companies such as Ericsson, Nokia, and Siemens, it obviously has an engineer bonus.
The engineer bonus of Wanhua Chemical is reflected in the proportion of academic qualifications and younger R&D personnel (see Figure 4). In 2022, Wanhua will have 2,981 R&D personnel under the age of 40, accounting for about 91%. R&D personnel are younger and more educated. constantly improving.
The management theme of Wanhua Chemical in 2022 is “Talent Year”, and the company always manages talents as the first strategic resource. The company is in a stage of rapid development, facing the risk of talent supply, and the existing talent training speed cannot keep up with the company’s development speed. It can be seen that Wanhua, as a R&D-driven company, has a core of highly educated young people, which is based on the company’s development needs.
Create a shared platform enterprise
The method of co-investment may achieve multiple goals in one fell swoop
Wanhua Chemical also promotes the co-investment of key employee projects, insists on balancing the interests of shareholders, the company and employees; insists on the consistency of risks and benefits, and realizes the sharing of risks and benefits between the company and employees. The purpose is to stimulate the entrepreneurial spirit and innovation of key employees power.
On November 19, 2022, the company released the “Wanhua Chemical Key Employee Follow-up Investment Management Measures”, which aims to organically combine the interests of shareholders, the company and the personal interests of employees, enhance the company’s core competitiveness, and create better investment returns for shareholders . For businesses that are in line with the company’s strategic development direction, have a long investment cycle, have business development prospects but have certain risks and uncertainties, and require investment and exploration; businesses that the company has invested but have not produced economic benefits and require further investment; other businesses For the approved new investment projects, the company plans to implement the co-investment of key employees, and the co-investment business company operates independently, conducts independent accounting, and is responsible for its own profits and losses. Business transactions with the company and its other subsidiaries strictly follow the relevant regulations on related party transactions to ensure that related party transactions will not damage the interests of the company and co-investment companies.
The scope of people who follow the investment is the backbone of the company (including managers, business and technical backbones). In principle, the total shareholding ratio of co-investors shall not exceed 20% of the co-investment business company. According to Qichacha, the company has previously reserved 20% equity in Wanhua Chemical (Penglai), Wanhua Chemical (Fujian) Isocyanate and Sichuan Wanlu Industrial through Ningbo Zhongtao to implement this backbone co-investment. The above-mentioned three companies are also the implementation entities of Wanhua’s key projects in the future, operating the Penglai high-performance new material integration project, the 400,000-ton/year MDI and 250,000-ton/year TDI projects, the 80,000-ton/year NMP project and the 20,000-ton Ton/year PVDF project (approved for energy conservation review), covering all key directions such as polyurethane, petrochemical and new materials. In particular, the MDI project is the company’s flagship product.
Wanhua Chemical’s key employee co-investment management method is similar to employee stock ownership and Huawei’s full employee stock ownership. It not only takes care of the core interests of employees, but also guarantees the company’s technological innovation and technological confidentiality by signing non-disclosure agreements with employees to avoid technology leakage and strengthen technical barriers. . At the same time, for Wanhua’s new projects, it is equivalent to directional financing from internal employees. For Wanhua Chemical, which is constantly investing in heavy assets, this “Wanhua Chemical Key Employees Follow-up Investment Management Measures” serves multiple purposes.
(This article was published in “Red Weekly” on May 20. The opinions in the article represent the author’s personal views and do not represent the position of “Red Weekly”. The individual stocks mentioned are only for example analysis and are not recommended for trading.)