| Since the end of 2001, the accountancy scandals which broke out in big companies in the United States have fully exposed serious insider control problem in modern business enterprise system. People are now aware that not only does insider control exist in the transition economy but also in advanced market economy.Insider control is a widespread problem in firm governance. The accountancy scandals in the United States companies have more or less amplified the public's awareness of and concern for insider control. The issue has been a focus of firm governance.Insider control is substantly an agency problem. In modern business enterprises, agency problems are inevitable. Putting insider control under control needs looking for the path that make the agenqy cost minimum and this is the core content of firm governance.Firm goverance is a set of institution arrangements assigned to solve the agency problem at the premise that do not injure the agency result. The mechanism that repress the agency cost has two, one is an internal mechanism, the other is an exterior mechanism.The mechanism mentioned often by economists belong to in practice the formal system control, which is a series of laws policies. Formal systems in firm governance contain a lot of blemishes mainly due to incomplete contracts, so informal system control is important. The corporate culture is a kind of informal system control and is a kind of rule of behavior that employees will abide by subconsciously and automatically. Firm governance needs corporate culture.
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