Theory Of The Improvement Of Chinese Corporate Governance

In the 1990s, corporate governance started to come into the sight of our scholars'study. As a foreign concept, corporate governance has mainly been imitated and transplanted for such a long time that our corporate governance(governance structure and mechanism) is plausibly implemented. Remarkable as it is overseas, it is likely to be gloomy in China. It has been proved that there is no universal corporate governance and there is no country that can simply count it on "copycat" for good. Absolutely, it is an eternal topic that corporate governance improves with corporate economy. So far, the research achievements concerning corporate governance(governance structure and mechanism), is though tremendous, it is often seen in reality that many critical incidents happen such as cancellation of flights, shutdown of taxies, beating death of a general manager, tunneling, etc, all of which turn out that it is urgent to improve the corporate governance of China. Considering three mostly-prevalent governance theories, composed of Shareholder Primacy, Stakeholder and Organizational Control, and contemporary Chinese corporate governance practice, the author tried establishing an extending analytical frame based on the three governance theories and then work out a specific direction and content to improve corporate governance, which finally lay the foundation of the theoretical analysis. After sketching the panorama of the whole article, the write introduced close-ups to explore how to improve corporate governance of China from three aspects including labor union organization, external environment and technological innovation of the state-owned enterprises. On the basis of previous analysis, the author brought the questions raised in the beginning to a conclusive answer and thought primarily over the questions open to further research.Chapter 0.Introduction. According to the thoughts over corporate governance practice and abstract summary in domestic and overseas existing research literatures of corporate governance, the author raised the gist of the article---the improvement of corporate governance of China, and summarize the whole article's research ideas and overall structure, research methods and possible innovation and defect.Chapter 1.This chapter has a literature survey on the existing research of corporate governance and clarify the research scope of corporate governance and related core concepts based on the literature survey. The author followed the logic thread that presents the common character and individual character of how corporations govern an "jumbo". In the author's opinion, there are three representative research literatures of corporate governance according to orientation of solved problems and different perspectives of contemplating governance problems:conflict of interest perspective, innovation perspective and risk perspective. The author made review and comparison among the three different perspectives and then showed the common character, on the basis of which, the focus would be turned to different "jumbos". At the time, the individual character--- patterns of corporate governance --- become the highlight, then. The individual character and change would be demonstrated from three aspects including the classification and dispute of governance patterns, the cause of governance patterns and the evolution of governance patterns. After combing and comprehending three representative research literatures, the author attempted to define the research scope and related concepts of corporate governance and finally made clear the "border" of research and related concepts in the article.Chapter 2.A theoretical analysis frame was tried in this chapter and provide the improvement of corporate governance of China with an element of analysis or "frame of reference". The author firstly made an evaluation on the theory foundation of corporate governance, and then analysed the logical course of reasoning for the establishment of the Shareholder Primacy, Stakeholder and Organizational Control theories, which clarifies the similar and different resource, common character and individual character that lead to a comparative analysis of the three theories. With the deep insight into the three theories of corporate governance, the author attempted to construct an extending analytical frame and then sketch the panorama of the whole research, which offers a primary theoretical analysis frame. There are more details in the following chapters.Chapter 3.The improvement of corporate governance of China was analysed in this chapter by concentrating on strengthening the negotiation power of the labor union organization and establishing interest-balancing mechanism between companies and employees. The author started with recent phenomena such as collective return of flights, shutdown of taxies, beating death of a general manager, etc., inspected the research literatures of airline industry and taxi industry where the collective return of flights and shutdown of taxies occurs, and then pointed out that the existing research are more focused on the corporate efficiency than the coordination and distribution of interest between companies and employees that is virtually the deeper essence into which is led by practical needs. The author constructed a game model for the interest between companies and employees, through which, it's indicated that strengthening the negotiation power of the weak employees is the key to accomplishing the agreeable balance and coordination of interest between companies and employees. As the spokesperson of employees' interest, the labor union organization is vital to improving employees'negotiation power. Therefore, it is critical to establish a veritable labor union organization for constructing the coordination mechanism of both parties. However, the labor union organization is not practically veritable, why? How to make the labor union organization act veritably? How to construct the coordination mechanism between companies and employees? The author attempted to answer these deep questions and, according to previous analyses, made specific suggestions in the end on how to strengthen the negotiation power of the labor union organization.Chapter 4.This chapter carried out a empirical research for the relations between external environment and both ownership structure and company value, which is in order to explore the profound factors behind corporate governance (corporate governance structure or mechanism) and then improve corporate governance fundamentally, avoiding plausible and low-efficiency corporate governance (that can not effectively protect shareholder's value). In the chapter, the author established external environment indicators and demonstrated its influence on ownership structure and company value, which not only provides powerful empirical evidences for corporate governance effect of external environment, but also prompts people, more importantly, to divert to those fundamental factors which just have impact on corporate governance and finally deepen and widen the knowledge on how to improve the corporate governance of China.Chapter 5.The technological innovation of state-owned enterprises is the breakthrough point in this chapter. With the analyses of the corporate governance obstacles in the technological innovation of state-owned enterprises, the author explored how to boost the technological innovation through improving the corporate governance of state-owned enterprises. Beginning with the current situation, the author analysed the corporate governance obstacles in the technological innovation of state-owned enterprises, pointed out the incentive insufficiency in the innovation of business operators and technical staff is one of the main reasons that the state-owned enterprises fail to achieve human resource integration and organization integration and to accelerate the technological innovation. The author attempted to construct a model of incentive contract for the operator's technological innovation. With analysis and solution to the model, it is pointed out that the government, as the trustor, may adopt dynamic-achievement-based contracts and raise the payment proportion in achievement to attract those people, who have low risk-avoiding inclination, low effort-avoiding inclination and high contribution margin, to compete for the position of senior manager, which enhances the operative motivation in technological innovation; and reduce the effect of "noise" and increase the accuracy of achievement measurement to enhance the incentive effective of contracts., The author also attempted to construct a two-phase repetitive game model for two employees competing at work. It is pointed out with the model that it will effectively raise the technical staff's innovative motivation with some policies and measures such as bonus, promotion and benefit distribution, etc., which further can increase the reward for the outstanding technical staff (the winner in the model) and decrease the negative effect of random factors. At the end of the chapter, the author proposed concrete suggestions on how to improve the corporate governance of state-owned enterprises through four points including operator's technological innovation, technical staff technological innovation, supervisory enhancement of board of directors, financial guarantee of technological innovation.Chapter 6.With a summary epilogue, it is concluded with an answer to the question that is raised in the prologue---the improvement of corporate governance of China, and contemplated with two hands for the research work worthy of probing into further. On the one hand, according to the abstract generalization to the existing research literatures of corporate governance, the author thought about whether it was feasible to work out a governance theory based on the integrative analysis frame of profit and risk. If yes, the depth and practice value of the theory will outnumber the governance theory which concentrates only on profit and risk. On the other hand, at the end of 2008, the world was swept by the financial tsunami, which is appeared to be the malady of virtual economic sectors, but it actually turns out to be the "illness" of corporate governance in American substantial economic sectors. The author thought that the future corporate governance can be further studied from below four aspects. First of all, the shareholder's value encircling the study of distribution of residue is always the yardstick in the corporate governance of America. The improvement of enterprise's real production capacity is not concerned. However, the enterprise grows based on the improvement of its production capacity. Thus, it is necessary to self-examine the theory of shareholder's value, and it is more important to figure out a governance theory balancing the enterprise's production capacity and distribution of residue, which just undoubtedly brings enterprises sustainable development. Secondly, shareholder's value is only a "cloak" for the financial interest groups (including institutional investors, investment banks, etc.) and American company executives, who are just the biggest beneficiaries. The financial interest groups and company executives take united control of companies, which inevitably leads them to particularly pay attention to the performance of share price in capital market and to show cold shoulders to real production and operation. In the way, the virtual economic bubble is booming day by day and once it bursts, the latent crisis breaks out. Therefore, it is especially important to prevent the financial interest groups from manipulating companies for avoiding the comeback of crazy virtual economy and crisis. Thirdly, as corporate governance is related to the balance of interest structure in the enterprises that externally will influence the balance of interest structure in the whole society; thus, corporate governance is not only an economic problem, but also a social problem. It is very worth of a further study on how to research corporate governance in terms of society. Finally, the benefit of the majority of staff should be concerned in the corporate governance to increase the consumption ability of the wage-earning class. As author discovered, the financial crisis revealed a problem to be studied urgently when corporate governance is used to understand the reasoning of financial crisis:the negligence of the staff's benefit and the lack of consumption ability of the wage-earning class. They are also issues very worthy of a further study on how to pay more attention to staff's benefit in the corporate governance, avoiding the repetition of history and walking out of the strange circle of financial turbulence.