Research On The Corporate Governance Structure Of China’s Independent Institute

Independent Institute is not only a new educational model emerged in the reform process of China’s higher education system, but also a new system innovation made in the popularization process of China’s higher education. In this decade, Independent Institute develops rapidly and shows a booming trend. The official execution of Measures for the Setup and Administration of Independent Institute (Decree No.26 of Ministry of Education) on April 1,2008, further emphasized on the legal and institutional independence of the Independent Institute, further defined the private property of the Independent Institute and promoted the Independent Institute’s management system and operation mechanism reform and innovation. The release of Decree No.26 made clear that the expansion era of the independent Institute had ended and the Independent Institute entered into a crucial system change period. The university’s corporate governance structure is the core of the modern university system. After entering into the standard management and the quality improvement stage, constructing and improving the governance structure has become more critical. Meanwhile, the research of the governance issues has become more important and urgent.Independent institute’s corporate governance structure is a series of systems established with the prerequisite of adhering to public welfare education, focusing on the independent Institute’s property right system, based on the right distribution and balance among the investors, the independent institute and the host university. The governance target, property right system, governance mechanism and stakeholder issues constitute the basic frame of the independent Institute’s governance structure.After establishing the independent institute, there was no ready-made experience for reference in the early stage. Thus, the independent institute and investors signed an institute establishment agreement and school charter to constrain each other. School charter reflected the corporate governance structure’s original design best. It also reflected the independent institute’s birth defects in original system design. First, in the original system design, the independent institute’s corporate governance goal was to seek for the benefit and distribute the benefit. It highlighted the capital’s profit pursuit. Second, the property right mechanism design was unreasonable. How to assess the value of the intangible assets provided by the host university? How to quantify the intangible assets invested by the host university and tangible asset invested by the investors into the independent institute’s total capital? Such issues were not clear. Finally, the independent institute’s independent corporate status was not clear. The original design of the system only talked about the public universities and investors, but neglected the independent institute’s identity-an important independent educational entity.At present, in accordance with the investment and cooperation way, China’s independent institutes can be classified into two types, "School within a school" model and "Public universities + investor" model. Different institute systems face their own different practical problems. The independent institute with the "school within a school" model becomes a subsidiary department of the host university. It is of single property right structure and its corporate property and corporate power are vulnerable to the erosion of the parent university. The independent institute with the "Public Universities +investor" model has two major problems:First, the social investors dominate the property right of the institute and dominate the institute’s reputation claim and residual control right, so as to control the independent institute. Second, the independent institute’s internal decision-making mechanism is unreasonable, i.e. the board member structure is irrational and the board’s decision-making is undemocratic.In the face of Decree No.26, the corporate governance structure of the independent institute shall be improved without delay, no matter which kind of model is adopted. The basic criteria to construct the independent institute’s corporate governance structure: the independent institute’s reasonable corporate governance structure should reflect the education’s public welfare, suitable for the institute institute’s running model and advantageous for the independent institute’s sustainable and sound development. In addition, in order to make the independent institute develop more health and sustainable, the institute’s system must rely on the strong system support. Meanwhile, the sustainable and strong system, no matter how to design, must be combined with the independent institute’s characteristics. The key is to pay attention to three issues:the "School within a school" model has objective problems; face up the difference between the institute established by investment and donation; face up the contradiction between the capital’s benefit pursuit and education’s public welfare.