Studies On Employee Participation In Corporate Governance

Employee participation in corporate governance is quite common in a lot of companies across the world and recognized by most of thiere countries, which set forth the way and method for employees to participate in corporate governance in company codes. Employee participation in corporate governanc has an active and important significance for the reform and improvement of corporate governance structure and efficiency.Employee participation in corporate governance is proposed based upon a profound theoretical foundation. The labor force property rights is an important factor in production, and should be entitled to the same rights in corporate governance with the factor of physical capital, including the rights of participation in and supervision over significant decisions of a company. In traditional corporate governance structure based on shareholders'ownership, the separation and balance of ownership and administrative power fails to solve issues relating to corporate power distribution and execution fundamentally. It has a magnitude of drawbacks, and the establishment and execution of the right of employee participation in corporate governance is able to optimize the operational mechanism of company power. Meanwhile, it is also the highest form to protect the labor rights of employees.Generally, there are three corporate governance systems in the world, including the two-tier board structure represented by Germany, one-tier binary board represented by Japan, and one-tier centralized board represented by Britain and U.S. In the two-tier board structure, employees participate in company operation and management in the form of supervisors selected from them; however, occasionally, they can also participate directly by means of directors selected from them. In two-tier board structure, employee participation in corporate governance may deflect the corporate from the pursuit of profits to the pursuit of democracy and justice to some extent, thus influencing the focus on and pursuit of company operation efficiency.In one-tier centralized board structure, theoretically employees may take part in corporate governance by means of independent directorship but it is quite rare in reality. More than often they execute the stock rights in the form of various Employee Stock Option Plans (ESOPs) to participate in corporate governance. This model of governance is very positive in improving the ownership structure and decision-making mechanism of a company. Meanwhile, the implementation of ESOP enables the human capital owner to share the profits of the company with all other physical capital owners, which will upgrade the position of employees in the company and contribute to the formation of an equitable, mutually beneficial and cooperative relationship between the employees and the shareholders.In the one-tier binary board structure, employees participate in corporate governance mainly through directors and supervisors selected from them. For example, in Japan, employees take part in corporate governance by acting mostly as the external supervisor of the company, and as the director in special conditions. But in this board structure, there are some structural drawbacks and even legal impediments. To solve these problems, an independent director system is introduced referring to the one-tier centralized board structure.EU countries differ greatly in corporate governance structures due to different national conditions and legislation traditions; therefore, it is quite difficult to make coordination or unification among them. To solve this problem, EU bring into effect relevant policies and directives with an open and flexible attitude, which allow each EU country to select the model of board structure and employee participation in corporate governance that fits them best. Some member countries such as Italy even allow companies to choose model of board structure on their own will in the company legislation. Nevertheless, similarities also exit in terms of regulations for different corporate governance structures, and these structures tend to fuse to some extent.The employee participation in corporate governance system in China is also backed with solid socio-economic base and legislation traditions; however, there are still some drawbacks in legislation that have to be improved and corrected. It is suggested to uphold China's Legislation traditions on one hand, and recognize the international trend of corporate governance structures to become convergent on the basis of comparing and referring to employee participation in corporate governance systems in different countries, so that a multi-level, solid, and flexible employee participation in corporate governance system can be formed. Moreover, the external environments for corporate governance shall also be better off when its internal structure is being improved.