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Positioning of the functions of the board of directors of listed companies in China and its mode of innovation

Author: TianLi From: www.yourpaper.net Posted: 2009-10-22 21:56:26 Read:
Abstract: This paper through analysis of China's capital market conditions, the functions of the board of directors of listed companies in China should be the main "strategic decision-making functions, complemented by the view of the supervision and control functions, and on this basis, constructed adapt board models: the effective discharge of the Board of Directors of strategic decision-making functions and effective legal system of the independent directors to fulfill their supervisory functions.
Keywords: Listed supervision and control of the strategic decision-making functions of the Board of Directors of the Company mode functions

Academia on the Board of Directors, from different angles reveals the high efficiency to achieve the functions and responsibilities of the board of directors is the fundamental motivation to improve the Board. Therefore, critical to clarify the functions of the board of directors. With the constant improvement of China's capital market, the functions of the board of directors of listed companies should re-positioning, and the establishment of board models corresponding to adapt in order to ensure the efficient operation of the Board.

Positioning of the functions of the board of directors of listed companies in China

(A) the strategic decision-making functions of the main
In theory, linked to positioning and environmental conditions of the functions of the Board. Company in imperfect securities markets, there will be serious agency problems, the agency problem not only because of agency costs and the value of the company directly have a negative impact, but more importantly, it increases investors, policy makers as well as managers the degree of asymmetric information, contains a great deal of risk, a serious impact on the long-term development of the securities market, thereby enabling the agency problem is more serious and urgent requirements of the organization of this vicious cycle emphasis on agency problems, reduce agency costs. In this environment, the Board of Directors should play a monitoring and control functions. With the constant improvement of the securities market, the agency problems continue to ease, when the company's results from strategic decision is right or not, especially in a highly uncertain environment, requiring the company to make a correct and consistent strategic decision to respond to environmental change, and that the value of the strategic decision-making in a highly changing environment, will be beyond the drawbacks of agency problems. In this environment, the board should focus play to the functions of the strategic decision-making.
With the Shanghai Stock Exchange S Sichuan Road & Bridge S Chongqing Water Conservancy seven listed companies announced in November 2006 into the 56th batch of the share reform program, the Shanghai and Shenzhen have been completed and the company into the share reform program of 1191, to account for the total number of listed companies 88.7% of the market value of the share reform accounted for 94.23%, the split share structure reform in China has been completed. Has a basic, inherent impact on the capital market due to the split share, to complete with the split share reform, China's capital market gradually perfect: not only improve the pricing mechanism of the market, and the gradual elimination of non-tradable shares and tradable The split of the shares of the two markets, the Securities and Exchange price to be able to dynamically reflect the market value of real market mergers and acquisitions and asset restructuring goals and motivation. In addition, the equity division reform the behavior of the major shareholders of listed companies in China, will be completed to market game change the game from the shareholders of the internal behavior of shareholders, especially shareholders behavior will gradually become more rational. All of these instructions, the oversight function of China's capital market is gradually expanding, originally performed by the listed company's internal oversight functions, will gradually be external oversight functions of the capital markets replaced. Such as decision-making and oversight functions of the main board of directors of listed companies on the inevitable and necessary to weaken its oversight functions, and will focus on positioning in strategic decision-making functions, give full play to the role of strategic decision-making, effective decision-making to reduce costs and improve corporate performance.

(B) supervision and control functions, supplemented
However, as long as it is not perfectly competitive, as long as there is information asymmetry, even if the capital market is developed capital markets abroad, and are completely impossible to fulfill the oversight function, relying solely on external governance mechanisms are not enough to solve the problem of supervision of managers. This is because the external governance mechanism of supervision afterwards, only to play a role only in the company problems. John Pound (1995) pointed out that the takeover and leveraged buyout did not directly address the actual problems in corporate governance. In this case, the Board of Directors of the company's internal governance mechanisms attention has been paid as an ex ante governance mechanisms gradually. In China, the basis to solve the capital markets, institutional issues is a complex system engineering, the split share reform just to solve the structural problems in the market, the deep-seated structural problems still exist, information disclosure and transparency of the share reform may face a more serious challenge. These must be resolved through the market to strengthen their own environment and external policies supporting. Therefore, China's capital market can not be completely replaced by the Board in fulfilling its oversight functions listed companies, the oversight functions of the listed companies must have a part by corporate governance body - the Board of Directors to complete, but the oversight functions of the Board relative weakening it.
So, the positioning of the functions of the board of directors of listed companies in China should be based on "the strategic decision-making functions mainly supplemented by supervision and control functions.

Build an effective decision-making functions to fulfill the strategic board

As can be seen from the above analysis, the governance of the board of directors of listed companies should focus on the the scientific strategic decision-making, governance goal should be to reduce or even eliminate the company's strategy appears significant, the possibility of error and accelerate the speed correct the error occurred, improve the efficiency of the operations of the Board. This board of directors that the board of directors of strategic need to build a new suited to play the role of decision sciences, its governance to maximize efficiency. The Board of Directors of the strategic mainly from the following aspects:

(A) The Board of Directors to implement participatory governance
Board of Directors to implement participatory governance, participatory process is the process of governance. "Governance is not a final assessment audit, it is the interaction between the board and management, total recognized effective decisions to participate in the interactive process, rather than the review. Board of directors put governance into research, survey research process is also the process of governance. Board to understand and master the information, by providing the necessary consultation, more research around the central task. Board through participation, dialogue and collective decision-making, and make the best judgment.

(B) The members of the Board constitute diversification
Professional composition of the members of the board of directors of listed companies in China, an appropriate increase in legal, accounting and other professionals, board members in financial accounting, international market, management experience, industry knowledge, customer experience, the response to the crisis, leadership or strategy planning capacity, as well as legal expertise or experience to form the diverse composition of the Board.

(C) the establishment of information transmission mechanism
Information transmission mechanism design of the internal rules of the Board Governance, some formal or informal rules of the working procedures of the Board's proceedings, meetings and communication, and to determine the efficiency of the decision-making of the Board and the degree of control. Board is involved in the development strategy must be comprehensive, effective, truthful and accurate information in order to ensure the scientific nature of the strategic decision-making, it is necessary to establish an effective information transmission mechanism between the Board and the managers to make the provision of information and access to equilibrium. Information transmission mechanism design to the content of the information, access to information as well as the quality of information, standards, and strive to comprehensive, high quality, timely and effective.

(D) establish a formal strategic plan for the year in the board of directors and managers interlaminar procedures
Procedures between the Board and management to establish a formal strategic plan for the year, you can improve the quality of the company's strategic decision to bring high returns, to avoid potential losses. This approach is increasingly widespread application of good governance practices. Board of Directors to develop strategies and managers to develop a business plan for the two roles must be clearly defined. "The board of directors to comply with the rule class (check the company's past and present), and strategic decision-making (the shape the company's future) between balanced use of their time and effort.
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