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Looking for corporate governance model suited to China's national conditions

Author: QuShaoPing From: www.yourpaper.net Posted: 2009-11-21 08:52:09 Read:
[Abstract] corporate governance is good or bad, affect corporate earnings, thus affecting the attitude of investors in the securities market, further affecting the financial markets, the ultimate role of savings into investment process, affecting the development of the real economy. But the Chinese can not copy the Western model of corporate governance, combined with China's national conditions, explore out their own strategy.
China's national conditions [keywords] corporate governance model

2008 CITIC Pacific events, parallel to the three pillars of the financial markets and trading mechanisms and regulatory mechanisms of corporate governance has once again become the focus of the financial system. When we talk about corporate governance, the first time will think of learning from the West. But we can not be purely "ism" must be based on the realities of China, looking for a suitable development model. The analysis of the three parts of the Western model of corporate governance, the reality of corporate governance in China as well as suitable for China's corporate governance structure.

A Western model of corporate governance

The essence of corporate governance is to deal with property rights, decision-making power and the right of return tradeoff. Internal interests of any economic entity are the result of the game. Adopted corporate governance model, depending on the respective interests of the game: shareholders, directors, staff relations. Corporate governance can be divided into two major theories, traditional narrow "shareholder governance model, namely the operators to maximize the interests of shareholders for the governance objectives; well as a broad stakeholder governance model, emphasizing the value reflected in staff, creditors, and other social impact of stakeholders. The main structure of interest determines the governance structure of the company, to determine the role played by the related company, which can affect their enthusiasm, and finally affect the value of the entire company. The corporate governance of the capitalist countries the following four modes:
1. Maximize shareholder value mode: Anglo-American countries, the traditional model of corporate governance, the company's sole objective is to maximize the ROI is increased;
Balance of interests mode: the Netherlands and Germany on behalf of the corporate governance into account not only the interests of shareholders, and also considering the interests of various stakeholders;
3 company interests mode: France on behalf of, in any case, the directors should act in the interests of enterprises.
4 workers interests mode: Japan on behalf of the lifetime employment the young serial system and enterprise unions are the three magic weapons, reflects the principle of supremacy of the interests of workers.
The corporate governance model is based on the country's own background and the mode of economic development, gradually formed, the state had a huge role. In either mode, the board of directors is very important, which represents the interests of who has become the focus of corporate governance.

Second, our corporate governance, the actual situation in

Shareholding structure is irrational. The unique split share of non-tradable shares inconsistent with the interests of the holders of tradable shares, resulting in the lack of corporate governance common basis. One hand, non-tradable shareholders concerned about corporate control of the tradable shareholders concerned about the stock price; the cost of non-tradable shares the same investment in shares, on the other hand, is much lower than the outstanding shares, but get the same share dividend, resulting in costs and benefits are not match, tradable shareholders at a distinct disadvantage.
2. "Due to the dominance of" harm the interests of minority shareholders. Listed companies there is a serious the controlling shareholder emptied funds behavior, related party transactions, transfer of profits and funds used widespread harm the interests of small shareholders. As of 2005, the two cities, there are 480 listed companies exist occupied by the largest shareholder funds, accounting models the cumulative amount of 480 billion yuan, equivalent to half of all listed companies net profit in the first half of last year. In the small shareholders believe their own funds for investment entities project can obtain the expected future earnings, a lot of money was transferred to the hands of the largest shareholder, and its use is not known.
Board naive, and the Board of Supervisors not supervisors. As the China's mainland statute law, corporate governance structure is largely reference binary pattern. Of minority shareholders do not participate in the shareholders' meeting, the board of directors elected at the same time due to the myriad of nepotism, the Board generally held by the largest shareholder of internal staff does not have independent decision-making ability. The members of the Board of Supervisors are mostly of internal retired workers, the lack of professional knowledge structure, will not achieve financial oversight role of the board of directors, non-existent.
4. "Enterprises running society." The workers "iron rice bowl" thinking is still a serious lack of enthusiasm, and within the enterprise arranged to go to school, cure the size of the transaction, resulting in huge cost-effective meager. Suitable for China's national conditions of corporate governance structure

Throughout our reality, reference developed capitalist countries of the Western model of corporate governance, I believe that, in the choice of a model of corporate governance in China, you should consider the following questions:
1. Their cultural and legal background. The centralization will of the deep-rooted, and the lack of courage of moderation character makes a meta-model is not applicable in our country. Britain and the U.S. has been able to successfully use a meta-model, because the belief in equality, freedom, and the Public Christian culture, have a strong awareness of the rights of minority shareholders. In addition, the civil law and common law of different China can not copy a meta-model. Anglo-American ownership dispersion, small shareholders accounted for the majority of its legal system is more focused on protecting the interests of small shareholders, and China do not have the legal safeguards for the protection of small investors, only to take concentrated shareholding.
(2) we must clarify the relationship of interest. In the a complex corporate internal and external (mainly shareholders enterprises), are inextricably linked, and this problem can not be solved in the foreseeable short-term.
3 people management difficult. " The huge population we must take the totalitarian system, resulting in excessive level of corporate governance, governance difficulties.
The face of such a complex national conditions, but also due to the existence of the company diversified, various corporate governance model in our country has success stories to be generally summed up a model to summarize our model is unrealistic. To find the most suitable approximate model should be the essence of the various modes of meta.
(1) The concept of corporate governance - stakeholder theory. Huge population and scientific development of the concept of governance, have rejected the "maximize shareholder value" model of corporate governance, to support the company should bear the social responsibility.
(2) Corporate Governance Structure - Binary mode adding a meta-model elements. Under statutory law, our company should set up a board of directors and board of supervisors, and the establishment of an independent director. Mode lies in the checks and balances of the source - large shareholders too much power, and the complex political game, to find out the constraint mechanism of the abuse of power by large shareholders, allowing small shareholders into the shareholders' meeting, the Board and the Board of Supervisors from the largest shareholder control. Independent director should be a trade union representative or creditors.
(3) Corporate Governance core - the shareholding structure of the state-owned enterprises, and information disclosure mechanism reform. To improve the corporate governance structure, should focus its efforts to to change inequality equity long-term phenomenon, information transparency is at its core.
(4) Corporate Governance soul - human resources. The management of the overall awareness and solid expertise, operational capacity is the fulcrum of governance. Highly qualified board of directors in order to make the right decisions, high-quality board of supervisors to be effective oversight and checks and balances of the Board of Directors. Countries should vigorously strengthen the popularization of scientific and cultural knowledge, enterprises should also be merit-based, rather than "the relationship between employment".
The external conditions of corporate governance, including legislation, workers' rights protection, SFC supervisory role, is a long and complex process, explore This article will discuss the micro level. But I believe that the core is to solve the problem of inter-related political game, however, the reform will inevitably lead to a wide range of, and therefore should be carefully considered.

[1] Research Center of the Shanghai Stock Exchange Corporate Governance Report (2007): stakeholders and corporate social responsibility. Fudan University Press
[2] Jansson et al. Study on the conflict of interests between shareholders - the root of the role and governance. Peking University Press, 2007.
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