Study On Legal Issues Of Institutional Investors Participating In The Corporate Governance

"Institutional investor"(Institutional investors) is one of the moregeneral and broad category, according to own understanding may bedifferent to Institutional investors under a different definition. In thecontext of institutional investors participating in corporate governance, theinstitutional investors generally represent the interests of small investors,the small investor’s savings together management, to a specific goal, in therange of acceptable risk and within the stipulated time, the pursuit of themaximization of investment returns. In our country, the concept of"institutional investors" is not in law had a clear definition, just to"qualified foreign institutional investors" and "qualified domesticinstitutional investor" in the name of the relevant legal documents. Also,Chinese scholars are not uniform understanding of institutional investors.The author thinks that, although there are different understandings ofinstitutional investors in reality, but at least in the following two ways ofunderstanding should be consistent, organizational and financialinstitutional investors. Institutional investors should be a certainorganization, individuals rather than as a natural person. Although theorganization in the vast majority of cases have the legal person status, butalso can’t deny that, in some cases, the possibility of unincorporatedorganizations as the institutional investors. These organizations andindividuals engaged in securities and other financial products business, but he is bigger than the size of the individual investor, management moreprofessional and stronger ability to avoid risk. Therefore, institutionalinvestors is by a professional investment management, with its can use itsown funds or funds raised through securities and other financialinstruments in financial markets on the non personal financial institutionsof all kinds of securities investment.We can learn by the definition of institutional investors, under normalcircumstances, the institutional investors is for small individual investorsto invest in financial management of the professional institutions, plays a"information intermediary, risk mediation supervision mediation, timelimit mediation, scale and trading intermediary mediation," role, whichhas the following legal characteristics: first, institutional investors are notpersonal financial institutions. Institutional investor in the first place, is akind of organization is not personal. Second, institutional investors withdual principal-agent relationship. Third, institutional investors, investmentscale and specialized investment management. Fourth, institutionalinvestors invest primarily equity or debt financial products, and profitableand non holding equity investment direction. Fifth, institutional investorshave investment structure combination and investment behaviorcharacteristics of standardization.The legal characteristics of the institutional investors or institutionalinvestors in a certain sense of advantages relative to individual investors,but the play of the institutional investors, this advantage is not absolutelyunconditional, but is affected and restricted by the following conditions:first, about the information disclosure of listed companies. Secondly,institutional investors own existence cognitive biases and behavioral biases. At last, the institutional investors principal-agent problems.Advantage because institutional investors play a restricted by the manyconditions, so we should advocate institutional investors to participate inthe governance of listed companies, at the same time, institutionalinvestors themselves also should burden certain obligations, only in thisway, can we make to effectively play the advantage of the institutionalinvestors, the stock market to get healthy and stable development, makethe interests of small investors get effective protection.Although institutional investors has the characteristics of thecommon law, but in the internal structure of different types of institutionalinvestors, investment motivation, investment objectives, as well as certaindifference. Based on the above analysis of the institutional investors, legalcharacteristics and types of institutional investors in the actuality, thispaper studies the institutional investors mainly includes the followingcategories: securities investment funds; Securities company; The socialsecurity funds; The insurance company; Commercial Banks; Otherfinancial institutions or assets management institutions.Corporate governance theory is our study of institutional investorsparticipating in corporate governance of another theoretical basis.Corporate governance both in theory and in practice has not form a unifiedand consistent definition, but it doesn’t mean that we grasp the basicmeaning of corporate governance. Actually, we can see from the abovediscussion, the corporate governance concerns and solve the problem isthat "for the benefit of the who governed" and "governance". Corporategovernance is to solve the two problems of a complex mechanism. Amongthem, the first problem is the purpose of corporate governance issues, to the second problem relates to the issues of corporate governance structureand mode.Corporate governance is not only to pursue the maximization ofshareholders’ interests, but also to protect and care for the otherstakeholders of the company. Corporate governance of the diversifiedpurpose determines the corporate governance should also is a diversifiedmanagement, its performance is the company’s various capital of devoteesin the rights and duties in the relationship produced in the process ofcorporate governance, the essence of which is between the investors andthe company’s decision makers, the interests of the distributionrelationship between supervisors and executives, including all thedevotees of capital in the process of production and operation, control,participation, selection, incentive and constraint, etc.In order to achieve the purpose of corporate governance, corporategovernance is to take certain structural patterns. For corporate governancemodel, different scholars from different Angle to the differentclassification, such as corporate governance mode based on the model ofthe board of directors divided into Anglo-American system of single modeand the German-Japanese mode of double deck system, based on thepurpose of the company is divided into shareholder oriented mode,managers-oriented mode, labor oriented mode, national oriented modeand stakeholders-oriented mode, based on the monitoring model isdivided into external control model and the model of internal control,based on the perspective of financing shareholder leading mode and bankleading mode, and so on. But the division of the corporate governancemodes are not unrelated to each other, but there is a cross, such as Britain and the United States of the system of single mode to a great extent andshareholder oriented mode, shareholders and the model of external control,and the pattern of double layer system, in the very great degree and labororiented mode, Banks, and the model of internal control.Institutional investor activism in the context of economicglobalization to promote the further development of the global corporategovernance, promote the traditional corporate governance modeldominated by the two respectively in a different direction, namelyAnglo-American corporate governance model of equity market controlmode gradually to the equity market through shareholder control anddirect control of a combination of development, while the German andJapanese corporate governance model by the creditor’s rights and thedirect control of the way gradually to the direct control of creditor’s rightsand equity directly control the combination of development. In the processof this development, the institutional investors of the former is by thedevelopment of market-oriented to close, while the latter is theinstitutional investors are from the close to the market-orienteddevelopment. As countries in politics, economy, history, culture and legalsystem, as well as differences, in the process of development is under the"path dependence" of system and institutional complementarity, theinfluence of such factors as the world can’t be formed unified consistentcorporate governance modes. But, in spite of this, all kinds of governancemodel on the basis of complement each other mutual fusion convergencetrend is more obvious, and institutional investors in the process of thisdevelopment is the main driver.From the practice of institutional investors participating in corporate governance at home and abroad, the development of institutional investorsthemselves and the rise of activism, laid a basis for institutional investorsparticipating in corporate governance. The development of institutionalinvestors in foreign countries and actively participating in corporategovernance also brought certain influence to our country. Since the1990s,China’s institutional investors have gradually developed and shows atendency of actively participating in corporate governance.Institutional investor actively participating in corporate governance isnot only a theoretical foundation and realistic foundation, but also thebasis of the legal system. Legal system support for the development ofinstitutional investors and deregulation of the development of institutionalinvestors has provided the essential condition, thus promoting institutionalinvestors to actively participate in corporate governance. Largeinstitutional investors in China to grow and their participation in corporategovernance is inseparable from the support and protection of our country’srelevant legal system.From the overseas related legislation and practice experience, theformal way of institutional investors participating in corporate governancemainly solicitation agent for the right to vote, introduced legislation anddirector nominations, informal ways are privately negotiated, publicopinion and published corporate governance standards. The way thesepathways are worth our using for reference. On this basis, the need of ourcountry related legal system improved.In modern company law system, institutional investors way through aseries of formal and informal way to actively participating in corporategovernance does not mean that institutional investors can do whatever you want, to institutional investors participating in corporate governance islimited by a certain law, the restrictions in addition to reflect the path ofinstitutional investors participating in corporate governance can not inviolation of the provisions of the law, further embodied in the laws of thecountries around the world generally institutional investors should havethe faith of his obligations under the (fiduciary duty). Our country therequirement of normative legal documents has institutional investorsundertake corresponding faith obligation, but because of general and notperfect, should be perfected.