Research On The Complex System Of Corporate Governance

Corporate governance system consists of two sub-systems: the inner-system and outer-system. When analyzing what the system constituents are and how they make up of two sub-systems, we can see the corporate governance system has some characteristics of a complex system. So the corporate governance system is a complex one.The inner-system allocates the governance power to the shareholders, board of directors, executives, creditors and employees, affording a framework for them to communicate. As an interest group, the value of one constituent depends on the perpetual cooperation with others. If one is absent or opportunistic, the interests of others may be harmed. So each constituent should do his duty loyally under the control of the system. Through the collective efforts of all constituents, the innner-system serves as a self-regulating system.The outer-system exerts its function to the corporate governance by the participation of stakeholder, such as government, market, agencies, media, community and the soft restriction of social culture. If one constituent takes no action or its action is not so efficient, one of the others can acts as a substitute to some extent. The outer-system is complementary to the inner-system. The inner-system designs an orbit to make corporate governance run smoothly and the outer-system is to prevent corporate governance from deviating from this orbit.The corporate governance system behaves as bilateral or multilateral game, learning and information exchange. The systemcan allocate the governance power dynamically, the constituents interact and affect each other, and the whole system is synergetic. The ideal corporate governance system is the one that can make Pareto- improvement through integration of the inner-system (self-regulation) and outer-system (the whole society supervision).