REFORM AND INCENTIVE MECHANISM ON EQUITY STRUCTURE OF FAMILY ENTERPRISES

Abstract

From the perspective of realizing “everlasting business”, how the founders of family enterprises in China can promote the reform on the ownership structure of the enterprises and establish an inclusive incentive mechanism, so as to take into account the inheritance of family wealth, to improve the technological innovation ability and the valuation (market value) of enterprises, is an economic and legal issue that is well fit for the current demand of China’s economic situation, and is also related to the long-term development of China’s economy. Its legal practice is worthy of in-depth study by Chinese legal scholars. This article reviews the transformation and development process of the ownership structure of family enterprises since China’s “Reform and Opening-up”, through interviews with the founders of family enterprises and field research in Fujian Province, a representative area of China’s family business economy. The article pays special attention to the practice under the current on-going “business succession period” between the first-generation entrepreneurs and the second-generation leaders. The article collects the relevant legal and economic issues in the internal corporate governance mechanism, and explores the relationship between properly coordinating and optimizing the ownership structure of family enterprises, incentive mechanism and maintaining the allocation of wealth resources under the tradition in Chinese family society.