Problems existing in China's corporate governance structure and improvement countermeasures

Abstract: The company system reform of state-owned enterprises in China has gone through more than ten years, but the overall effect is not ideal. The improvement of corporate governance structure after restructuring will be a systematic project with a long way to go, which is directly related to the process and effect of corporate reform of state-owned enterprises. Based on the analysis of the problems existing in the corporate governance structure of state-owned enterprises in China, this paper puts forward some suggestions and countermeasures to improve and perfect the corporate governance structure in China.

Keywords: state-owned enterprises, corporate reform, corporate governance structure, improvement countermeasures

The term corporate governance structure originated from western economics, which refers to the organizational structure system of corporate governance composed of a group of natural persons with strict organizational structure. In modern companies, the shareholders' meeting, the board of directors, the board of supervisors and the executive body (manager) perform their respective duties, check and balance each other, and form a corporate governance structure.

Since 1993 established the modern enterprise system in China, great progress has been made in the reform of state-owned enterprises. In the process of reform and development of state-owned enterprises, a number of enterprises have established a relatively standardized corporate governance structure through standardized corporate system reform, formed a scientific decision-making body, and improved their market competitiveness. However, although many enterprises have established shareholders' meeting, board of directors and board of supervisors, their functions are not perfect, their powers cannot be effectively balanced, and they have not really established a modern corporate governance structure that combines incentives and constraints. There are still many problems to be solved and improved.

First, the problems of corporate governance structure in China

(A) the absence of owners has not been resolved, resulting in the "insider control" problem.

In theory, as long as there are state shares in the restructured company, then the state is the shareholder of the company. State ownership is essentially owned by the whole people. However, in the actual economic operation, the whole people have no strong binding force on the company's property rights. Therefore, it is an urgent problem that which organization or personnel will perform the investor's duties on behalf of the country (the whole people), enjoy the owner's rights and interests, realize the unity of rights, obligations and responsibilities, and the legal basis and authorization basis of such representatives. Because the representative of state-owned shares is not very clear, it has caused the de facto absence of owners. This gives the operators the opportunity to seek personal gain or the interests of small groups of employees in their own enterprises, which leads to the problem of "insider control", seriously damages the corporate property rights and established corporate governance structure of the company, and invalidates the trust-trust balance relationship between shareholders and directors.

(2) The ownership structure of the company is too single, the enterprises are not divided, and the independent management right of the company as a legal person is not really implemented.

Although the second paragraph of Article 4 and Article 5 of China's Company Law confirm the property right and independent management right of a company as a legal person, the restructuring of the company system in China is based on the traditional state-owned enterprises, and there are inevitably some problems, such as over-concentration of company property rights, absolute control of state-owned shares, simple ownership structure, etc., which make it difficult to form a diversified investment subject, truly implement the independent management right entrusted by the Company Law and realize the company's legal person status.

(III) Issues concerning the shareholders' meeting

After the corporate system reform of China's state-owned enterprises, "because the property rights of enterprises are too concentrated, the state shares are in an absolute control position, and China's securities market is not yet mature, the property rights trading market has not yet been established, and the number and shareholding ratio of social individual shares are limited, and individual shares (shareholders) tend to engage in short-term speculative operations. What they care about is not the long-term development of the company, but the short-term stock price rise and fall. Therefore, they are not interested in attending the shareholders' meeting. Even though a group of scattered minority shareholders are concerned about the long-term development of the company, some companies have limited the shareholding ratio and number of shareholders attending the shareholders' meeting, which makes the scattered minority shareholders "willing but unable". The shareholders' meeting has actually become a national shareholders' meeting or an enlarged meeting of the board of directors, and it is difficult to form a standardized and effective check and balance mechanism for the behavior of the board of directors, managers, supervisors and companies.

(4) Questions about the Board of Directors

According to the Company Law and Articles of Association, the board of directors is responsible to shareholders, entrusted by all shareholders, enjoys full power, makes decisions on behalf of shareholders and plays a central role in the company's leadership. But in reality, the board of directors of many companies has not played a central role. Its irregularities are mainly manifested in:

1. The formation of the board of directors is quite arbitrary. The board of directors was established before the shareholders' meeting. There are also many companies whose chairmen are also general managers. In the era of the old state-owned enterprises, "the gene of highly concentrated personal power in the general manager responsibility system was inherited and germinated in the newly established corporate governance structure, which led to some business operators' unhealthy tendencies and abuse of power for personal gain until they fell into the mire of crime and a large number of state-owned assets were embezzled and lost." ②

2. Although some enterprises have completed the corporate restructuring in organizational form, the original leading bodies have basically entered the board of directors. The members of the board of directors are highly coincident with the management, which makes the board of directors controlled by the management team, the role of directors representing the interests of shareholders invalid, and the board of directors is ineffective and cannot operate normally.

3. Describe the company's decentralization and balance mechanism as "the general manager responsibility system under the leadership of the board of directors" or even "the general manager responsibility system under the leadership of the chairman". Without the authorization of the board of directors, the chairman always pretends to be the "legal representative" and the "number one" and wants to "lead" the general manager in everything. The democratic and scientific decision-making mechanism has not been formed, which has disrupted the company's responsibility system and reduced the efficiency of the company's management.

(5) Questions about managers.

"In recent years, the phenomenon of abuse of power and corruption of managers of state-owned enterprises has occurred from time to time, especially some entrepreneurs who have made great contributions to the development of enterprises, such as Jun Shi Jian of hongta group, Yunnan Province, are in danger of retirement, but they have stumbled on economic issues, which makes people lament. This led to discussion and reflection on the "59-year-old phenomenon". " On the one hand, this phenomenon reflects the absence of incentive mechanism for managers in China's corporate governance structure, on the other hand, it also shows the absence of restraint mechanism for managers in corporate governance structure.

Article 50 of China's Company Law confirms the selection mechanism of company managers. But in fact, many restructured companies still use the management mode of leading cadres of state-owned enterprises to manage the managers of modern companies. This practice is completely incompatible with the corporate governance structure. It breaks the principal-agent relationship between managers and the board of directors, and destroys the mechanism of checks and balances at different levels of corporate governance structure.

(VI) Issues concerning the Board of Supervisors

According to Item (3) of Article 38 of the Company Law and Item (3) of Article 103 of the Articles of Association, the duties of the board of supervisors elected by the shareholders' meeting are mainly to supervise and restrain the illegal activities of the board of directors and senior management personnel. Because the restructured company is generally dominated by state shares, the members of the board of supervisors actually become the personnel designated by the state shareholders, and it is difficult for the board of supervisors to play a supervisory role. In addition, the insufficient channels for supervisors to obtain information, the low quality of supervisors and their unfamiliarity with the production, operation and financial management of enterprises are also important reasons why the board of supervisors of the company has not really played its role.

Two, improve the corporate governance structure of China's legal thinking

Description of the current situation of corporate governance structure in China: on the one hand, the corporate governance structure in China is imperfect and there are various distortions. On the other hand, the existing laws have not solved the problems in enterprise management well. Therefore, in order to establish a modern enterprise system with clear property rights, clear rights and responsibilities, separation of government from enterprises and scientific management, realize the original intention of corporate system reform and fundamentally solve the predicament of state-owned enterprises, it is necessary to overcome the imbalance of corporate governance structure during and after enterprise restructuring, and establish and improve a modern corporate governance structure with checks and balances. Based on this, the author puts forward the following countermeasures:

(1) Promulgate the State-owned Assets Law as soon as possible, reform the state-owned assets management system, solve the problem of the absence of company owners, and ensure that investors are in place. This is the premise of perfecting the corporate governance structure in China.

According to the Decision of the Fourth Plenary Session of the 15th CPC Central Committee and the spirit of the 16th CPC National Congress, the State Council established the State-owned Assets Supervision and Administration Commission, which was established on April 7th, 2003. SASAC is independent of government departments, which is conducive to the separation of government and capital. However, in order to implement the macro-decision of state-owned assets management and management system reform, there is still a lack of corresponding legal protection and support. Therefore, the basic law on the management and operation of state-owned assets should be promulgated as soon as possible, and under the guidance of this law, a state-owned assets management system should be established, in which the central government and local governments respectively perform the responsibilities of investors on behalf of the state, enjoy the unity of owners' rights and interests, rights, obligations and responsibilities, and combine management with management, so as to solve the problem of owner vacancy that has long plagued the corporate system reform of state-owned enterprises in China, ensure that investors are in place, and thus solve the "problem".

(2) Adjust the company's property right structure, reduce state-owned shares and realize diversification of investment subjects.

Judging from the corporate governance structure of the company after the current restructuring in China, the state-owned shares are in an absolute controlling position, the ownership structure is too single, and the operation mode of the board of directors is relatively closed, so the independent management right of the company operators can not be truly implemented. In order to change this situation, we must adjust the company's property right structure, reduce state-owned shares, expand the proportion of non-state-owned shares, and realize the diversification of investment subjects. Only by reducing the proportion of state-owned shares can we truly ensure the normal operation of the decision-making and management restraint mechanism of checks and balances among shareholders' meeting, board of directors, managers and supervisors in the corporate governance structure, and can we truly implement the independent management right of the company as a legal person.

(III) Effectively implement the legal status of the shareholders' meeting as the highest authority of the company and further play its role.

In the reform of corporate system, the diversification of investors is realized by adjusting the property right structure of the company. After establishing a reasonable shareholding structure, any individual, institution, legal person or country is prevented from controlling the shareholders' meeting alone and deciding the board of directors, the board of supervisors and senior managers. So as to ensure that the members of the board of directors and the board of supervisors can really be elected by the shareholders' meeting, and senior managers can really be employed by the board of directors by virtue of their own knowledge and talents. Only in this way can the legal status of the shareholders' meeting as the highest authority of the company be truly implemented and the role of the shareholders' meeting can be further exerted.

(D) Improve the board system, which is the core of improving the corporate governance structure in China.

The board of directors is the core of the corporate governance structure. It manages the decisions made by managers, determines the level and structure of the top management, supervises the company's internal control and financial management system, and determines the company's main strategies and decisions. Therefore, it is imperative to improve the board system:

1. Hold a general meeting of shareholders in strict accordance with the procedures stipulated in the Company Law, elect directors and form a board of directors, completely eliminate the arbitrariness of the board of directors, the fact that the chairman concurrently serves as the general manager and the members of the board overlap with the management, and truly establish and improve the principal-agent relationship between the board of directors and the management.

2. Optimize the structure and function of the board of directors, and improve the management level and professional quality of directors; Implement the independent director system and strengthen the decision support system of the board of directors; Ensure the collective decision-making of the board of directors, prevent internal collusion and protect the interests of minority shareholders.

3. Establish and improve the information disclosure system of directors to ensure that the corporate governance structure of the company is more transparent. Based on the trust legal relationship between the shareholders' meeting and the board of directors, the shareholders of the company have the right to know the relevant information of directors' activities, remuneration and commercial interests.

4. Improve the system of directors' obligations and responsibilities to the company. Directors' obligations to the company arise from the trust relationship between directors and the company. The main obligations and responsibilities are: (1) good management obligation and loyalty obligation; (2) Non-competition obligation; (3) Restrictions on loans and guarantees. ④

(V) To further improve the operating mechanism of corporate managers in China and establish effective incentive mechanism, restraint mechanism and selection and appointment mechanism, which are the key points to improve the corporate governance structure in China.

How can we ensure that those top managers who have business talents let go of their business without letting the owners lose the ultimate control over the company? I think it can be achieved in the following ways:

1, implement the joint-stock system for operators and improve the salary system for operators. Operators hold shares according to the actual situation such as the scale and nature of the enterprise. At the same time, "the remuneration of the company's operators should be linked to the company's operating performance, and the contribution to the operators should be rewarded and rewarded. The rewards for operators with outstanding performance are not capped, and those who fail to complete the performance indicators on time will be deducted accordingly. " ⑤

2. Strictly implement the authorization system of the management board of directors to avoid the phenomenon of "insider control". Cultivate and establish the professional manager market in China, and improve the manager appointment system. Form a real legal relationship between the manager and the company and strengthen the manager's sense of responsibility and mission.

(VI) Strengthen the functions of the Board of Supervisors, improve the supervision and restraint mechanism, and give full play to the role of the Board of Supervisors.

1. Elect supervisors to form the board of supervisors in strict accordance with the election procedures stipulated in the Company Law. Supervisors shall perform their duties faithfully and fairly. They should not only carefully check the company's finances, protect the company's interests and the legitimacy of the company's business activities, but also supervise and correct the behavior of directors and company managers and report the relevant situation to the shareholders' meeting truthfully.

2. Firmly establish the legal concept that the board of supervisors is responsible for the shareholders' meeting, establish and improve the responsibility mechanism and restraint mechanism of the board of supervisors, and clarify the powers and legal responsibilities. When the external supervisor system is introduced, the board of supervisors can be composed of external supervisors and internal supervisors.

Corporate system is an effective organizational form of modern enterprise system and the direction of the reform of large and medium-sized state-owned enterprises in China, and corporate governance structure is the core of corporate system. Based on the special situation of corporatization reform of state-owned enterprises in China and various manifestations of nonstandard corporate governance structure, standardizing and perfecting corporate governance structure will be an enterprise revolution. The success of this revolution will surely lay a solid economic foundation for building a well-off society in an all-round way and creating a new situation in China's socialist cause.

[Notes]

① Stock option: a win-win choice for state-owned enterprises and operators. See all china lawyers association's lecture on legal practice of executive stock options. June 2002;

(2) Bai Qiande: Obstacles to the standardization of corporate governance structure of modern enterprises and countermeasures for improvement. See "New Exploration on the Reform and Practice of State-owned Enterprises" edited by Liu and Liu, Party School Press of the CPC Central Committee, p. 94;

③ Stock option: a win-win choice for state-owned enterprises and operators. See all china lawyers association's lecture on legal practice of executive stock options. June 2002;

④ Wang: "Directors and the Board of Directors in the Organizational Structure of Joint-stock Companies", see Volume I of Civil and Commercial Law, edited by editor, Law Press, p. 120-123;

⑤ "Stock option: a win-win choice for state-owned enterprises and managers", please refer to the lecture on "Legal Practice of Executive Option and Stock Option" in all china lawyers association. June 2002;

For reference only, please learn by yourself.

I hope it helps you.