Ding Mingquan (left), chief executive officer and president of Fujian Jinjiang Aojin Knitting & Garments Co, Ltd, gives an employee a certificate for a portion of the company's shares. He said he has thought of many solutions to retain good workers, and found that share incentives were the most efficient way. [Photo / China Daily]

Swimwear maker offers equity to employees as an incentive to stay with company for the long term

SHANGHAI - The maxim that to give is to receive took a long and troubling time to percolate through the mind of factory owner Ding Mingquan, but he's thankful that it finally did.

The 52-year-old swimwear manufacturer was weighed down with worries over holding on to talented staff at his business in Jinjiang, in East China's Fujian province, at a time when privately run companies are plagued by labor shortages.

It takes a month to train a new employee and, every year, 40 percent of staff moved on, damaging his competitiveness and profitability.

Finally, he decided he needed to create an incentive to maintain loyalty and enthusiasm. He did so by relinquishing 10 percent of his assets and handing them over in the form of shares to those who work for him. It's not an uncommon practice in the West but it is rare indeed in China.

Ding's business has grown steadily over the years since he opened it in 1979 after two years of experience as a local government clerk. It was a few months after the central government started the opening-up and economic reform under leadership of the late Chinese leader Deng Xiaoping.

Other garment manufacturers may need only two weeks to train a new worker, but Ding's company involves special fabric and techniques that take longer to master.

On Jan 26, the entrepreneur called his workforce together and made the announcement that everyone would get a portion of the company's shares after the Chinese New Year.

Ding recalled the tough early days when he set up the business. "At the time, doing business was extremely hard, and it's lucky that I developed my factory to its current size. So, you know, giving up 10 percent of my assets is like cutting my own flesh," Ding joked.

After years of growth, Ding's Fujian Jinjiang Aojin Knitting & Garments Co, Ltd currently employs nearly 400 people from the provinces of Hunan, Guizhou, Sichuan, Hubei and Fujian. The company's assets totaled 50 million yuan ($7.6 million) at the end of 2010.

But because of fierce employment market competition and rising inflation many staff sought better pay elsewhere. "Every year, up to 40 percent of my employees will quit, and we have to find the same number of people to fill the openings," said Ding.

"I have thought of many solutions to retain good workers, and I consider a share incentive is the most efficient, thanks to the inspiration of my good friend."

In October 2010, Ding invited his old pal Yao Yuansheng, a senior corporate identity designer from Shanghai-listed Orient Group Inc, to solve the problem. After two months of deliberation, it was Yao who suggested Ding should disseminate shares to employees.

An in-depth study of the company's operations showed that Jinjiang Aojin has plenty of room, enough equipment and adequate orders from home and abroad. However, people were the only uncertain factor of production.

Yao designed a blueprint for Jinjiang Aojin including share distribution and a five-year plan to get listed as a public company as well as building a famous brand nationwide.

"It wasn't accepted the first time I explained it, but I had told him that all the traditional incentives such as pay rises and bonuses only work in the short term. To give employees ownership of the factory will be effective in the long run," said Yao.

Yao's plan for an initial public offering also helped to persuade Ding, who regards himself as a traditional and conservative businessman. "When I saw more and more enterprises around me going public and getting bigger than my own factory, I felt a little bitter. I should use the leverage of the capital market, too," said Ding.

There are more than 30 listed companies in the county-level city of Jinjiang, outnumbering any other city of the same administrative level.

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According to Yao's plan, within five years, the company will get listed and, by then, every worker with holdings in the company will be able to cash in their shares.

"This is very attractive for us," said Jiang Huadong, an employee working in the sales department of the company. "Can you imagine each of us might become a millionaire overnight in five years?" he asked excitedly.

Jiang was one of the first 200 employees who received company shares on Feb 24, taking home 17,000 in total.

Jiang related the news to his friends in his hometown in Hubei province during the Chinese New Year, and more than a dozen of them decided to work in Jinjiang Aojin with him.

"Many of our migrant workers are extremely salary-driven, which means most of us will leave a company for another just for a meager increase in pay," said Jiang.

"But what Jinjiang Aojin offers is different. It promises us a stable and achievable future, and that is exactly what we are dreaming."