Chinese equipment and smartphone vendor ZTE plans to issue stock options to more than 2,000 employees as part of an incentive programme tied to the company’s financial performance.

ZTE’s board approved a five-year stock option programme for 2,013 employees, offering a combined maximum total of 150 million shares equal to 3.6 per cent of the company’s share capital. The exercise price of the stock options, which will be issued in three tranches, will be CNY17.06 ($2.48) each, which was the average trading price of ZTE’s shares on the Shenzhen stock exchange on 19 April.

The company said in a statement the move is designed to “retain talent and enhance the loyalty of the management and key personnel”. The programme is subject to the approval of ZTE shareholders.

ZTE’s employee options are subject to certain financial performance metrics being met. Stock options in the first tranche can be exercised if ZTE achieves a return on equity of 10 per cent in its 2017 financial results, with an annual net profit at least 10 per cent higher than the CNY3.83 billion ZTE would have generated in 2016 when excluding a provision related to a settlement with the US government.

The threshold for exercising options in the second tranche is a 10 per cent return on equity in 2018 and an annual net profit at least 20 per cent higher than the 2016 figure. For the third tranche, the threshold is a 10 per cent return in 2019 and net profit at least 30 per cent higher than 2016.

After reporting a loss of CNY2.36 billion in 2016 due to fines by the US government, ZTE bounced back in Q1 with a sharp rise in net profit and strong growth in revenue across its smartphone and carrier businesses. The company’s net profit rose 27.8 per cent year-on-year in Q1 to CNY1.21 billion on revenue of CNY25.75 billion, an increase of 17.8 per cent.