The Study On Director's Behavior Mechanism

The board of directors is the core of corporate governance, and the board performance results in the performance of corporate governance. Seeing from the domestic and international corporate governance practices, the reform of corporate governance especially emphases on how to improve board performance. The current study focus on the board's structure and characteristics which aims at improve board performance from rigidity aspects. But all the problems of the board of directors can not get away from the problems of directors, because the solution is depend on the judgment of the directors and excellent board performance also depend on the director's effort to carry out. Therefore, selecting the individual director as basic research unit, this paper takes angle of the director's behavior mechanism to discuss how to improve the board performance.The study of director's behavior mechanism, based on the understanding of the rule of individual behavior in organization, want to solve the four behavior problems the directors are facing: what, why, Why not and how to improve? Therefore ,this paper focus on study four area, that is (l)the function orientation of board director;(2)incentives mechanism;(3)restraint mechanism;(4)director's behavior modification.What the function orientation of the board director resolve is setting a target behavior direction for the board director which show board director should put effort into? In fact, there is a great deal of phenomenon that board director did not clear their responsibility and so they can't implement it. On the one hand the reason is the problem of role ambiguity, on the other hand the reason are the problem of role conflict and role overload. To solve these problems, we must get to the root of the matter and give a properly function orientation of the board director that based onjoint analysis of the conflicts board function and the characteristics of the different type of directors.Incentives for board directors firstly involve the board director's behavior motive Comprehending the type of board director's behavior motive and its' characteristics are the foundation to resolve how to encourage the board director to act on the direction of organization expectation. In all incentives ways, the remuneration incentives have the basically effect. So how to using the remuneration incentives to encourage the board director to carry out their oriented function efficiently?The concern to the behavior restraint mechanism of board director comes from numerous illegal behaviors of board directors in corporate governance practices. The paper firstly focuses on the path of behavior control mechanism of board director and analyses who will be the real person to restrict directors and how can they get to it. The analysis will help to find the reason of lacking stipulation to board director's behavior and provide the direction to the policy.The modification of director's behavior will be achieved by board of directors and director's evaluation. Through evaluation, directors know which areas their behavior can be further improved and the more abilities and knowledge needed. There are three layers of evaluation that is board evaluation, director self-evaluation and peer evaluation between directors. Board of directors and director's evaluation provide an effective means to modify director's behavior and make up insufficiency of knowledge and the ability.By using the methods of contrast analyze, normative study, empirical study, questionnaire and integrating the theories and methods of economics and management, the paper carried on the detailed study and arguments on the above four parts and got the following result and conclusions.(1) The structure of board is a result of the two factors. One is the function orientation of board based on the need of corporate development and strategy;anotheris the characteristic of different type of director and their validity in fulfilling the orientated function of board. So we should take a contingency viewpoint on setting and adjusting the board structure, and should not putt emphases on the ratio of inside directors and outside directors only.(2) Independent director is suitable for fulfilling monitoring function and strategy function, outside director is suitable for fulfilling of strategy function and resource function, while inside director is suitable for fulfilling of strategy function and information function.(3) The three greatest behaviors motive are honor, occupation development and remuneration and each has different incentives characteristics. The incentives effect of honor is stable while the incentives effect of occupation development is first up and then down. The remuneration has the diminishing marginal unity, and substitute for honor incentives in a certain period.(4) Incentives mechanism and restraint mechanism have different function. Incentives mechanism guides the people to appear the good behavior, while restraint mechanism keeps people from appearing bad behavior. For the great deal of grey behavior, behavior modification mechanism will urge director to change the grey behavior to good behavior. Excellent board performance could be achieved by using the three mechanisms as a system.(5) Design director's remuneration system according to the director's orientated function. Comparing the remuneration level, the remuneration structure has more incentives effects.(6) Because people have no controlling resource to set the negative stimulator and there are no medium to carry out restraint to directors, the restraint mechanism didn't work well. The access of restraint mechanism was blocked.(7) Board of directors and director's evaluation has the effect of improving the behavior and remedy ability actively. But the effect only can be achieved under thecondition of complete understanding both benefit and risk of evaluation, putting the evaluation forward step by step, and letting the whole board of directors member participate into the evaluation.