Internal Corporate Governance Mechanism

Corporate governance is broadly defined as a control system that is helpful for corporations and other organizations to conduct effective and efficient management, governance and resource allocation. Corporate governance system includes internal governance mechanisms, such as board of directors, management compensation and ownership structure. It also includes external mandatory governance mechanisms, such as legal systems, regulatory infrastructure and market discipline. External governance mechanisms are indirect tools of corporate control, while internal governance mechanisms are direct. Corporate performance ultimately depends on the improvement on internal governance mechanisms, because management failure always results from problematic internal governance mechanismsThis dissertation consists of seven chapters:Chapterl, Introduction. This chapter puts forward the main issues of this dissertation and discuses the background, motivations and the arrangements of this paper.Chapter2, Introduction of internal corporate governance mechanisms. After explaining the basic conceptions of corporate governance, this chapter investigates the function and limitation of external governance mechanisms. The author argues that, because of the large institutional costs, external governance mechanisms are difficult to function on a regular basis and the reform of internal governance mechanisms should be particularly emphasized.Chapters (board of directors), chapter4 (management compensation), and chapters (ownership structure) are the main body of the dissertation. Focused on the three important aspects, the institutional arrangement and organizational structure of the internal governance mechanisms are explored.Chapter 3, Board of directors. Conceptual framework, organizational design and institutional structure of board of directors are discussed in this chapter. Empirical researches on board of directors are also surveyed. Based on the analysis, the author made great efforts to trace the evolution of the board and explore the methods to improve it.Chapter4, Management compensation. After the investigation of the incentive role of management compensation, this chapter discusses the design of incentive-based payment and performance evaluation. Particularly, the incentive effects of stock-based compensation are reviewed.Chapter 5, Ownership structure. The author analyses the governance function of large shareholder. He shows the global differences of corporate ownership, and explains theevolutional drive of ownership structure. In addition, based on the investigation of agency costs of large shareholder, this chapter discusses the optimizations of ownership structure.Chapter6, Comparative institutional analysis of corporate governance paradigms. In this chapter, two typical corporate governance models in developed economies are compared and analyzed on an institutional basis. The two extreme corporate governance structures (outsider system and insider system) and their respective economic contexts provide valuable implications for China SOEs governance reform.Chapter 7, Discussion on internal corporate governance mechanisms in China. Based on the discussion of the unique background of the state-owned enterprise reform in China and the economic transition in East Europe Bloc, path selection of China SOEs governance reform are discussed. Combined with the related empirical results, the current situations of the SOEs reform, especially the internal governance reforms are evaluated. Finally, some suggestions are given to improve the performance of internal governance mechanisms.In this dissertation, two main academic contributions are provided as follows:1. Internal governance mechanisms, specially the core role of the director board are systematically analyzed. The conceptual framework and organizational arrangement of board discussed in the paper will be helpful to understand and improve the structure of board of directors.2. Based on the analysis of institutional structure of the two typic...