The Research Of A Corporate Covernance In Russian Economy Transition

Since the nineties of the 20th century, Russia privatized the colossal state-owned economy; and set up the micro economy based on private ownership. However, due to the political nature, radical process and non-compensating mode of the privatization, the efficiency of the post-privatized companies was not improved. As to transitional economy, the reform of property ownership is not the sufficient condition that the efficiency improves, i.e. the privatization of property ownership is not destined to improve the efficiency of the companies. Therefore, to establish efficient corporate governance structure is the key task in micro economy. The first section: Corporate Governance and Its Function in Transitional Economy. This section briefly introduces the definition, composition, pattern and function of the corporate governance. Corporate governance in the broad sense is a set of laws, culture and institutional arrangement regulating the distribution of control power and surplus in the company. Corporate governance is prescribed by formal and informal obligations. The formal obligation involves governmental laws, the company's regulations, and a series of concrete contracts; while the formal obligation includes the rules formed through culture and social custom. From the practice of the modern western corporate governance, there are mainly two patterns: one is Anglo-American mode based on capital market financing; the other is bank financing based mode in Germany and Japanese. Economists state that the following features efficient corporate governance: distribution of control power and surplus should be maximally corresponding; the manager should bear certain risk; the capital owner should possess the authority to choose and supervise the manager; the optimal corporate governance should show a situation-depending control structure; the ownership should be properly concentrated on big shareholders, thus to solve the "hitchhiking"of investors. As to transitional economy, to establish efficient corporate governance is crucial. 1. The effectiveness of corporate governance affects the reform of micro economy base. 2. The level of corporate governance affects economy growth. 3. Corporate governance is the most basic and powerful weapon of company's competitiveness. The second section: The Legal Foundation of Russian Corporate Governance and the Protection of Property Right. This section, chronologically, introduces the laws issued by Russian government, since the privatization, on corporate governance and the protection of property right; and the efforts of society to protect property right. The 1992-issued economic reformation principles and the first part of 1995-issued Civil Code of Russian Federation roughly regulated the corporate governance in the initial stages of privatization; through these, however, the property right were not well protected but frequently violated. The 1995-issued Stock Company Law is much more important with an indisputable advantage of its great details, well regulating both corporate governance and the protection of property right. In 2001, the Russian government revised Stock Company Law, making it more efficient in regulating companies'behaviors and the protection of property right. Meanwhile, Company's Behavior Law wasissued to further balance the interests related with the company. Also, the establishment of nongovernmental associations such as the Association of Investors'Protection and the Institute of Company Law and corporate governance shows the growth of the social potencies engaged in regulating company behaviors and the protection of property right. The third section: The Status Quo of Russian Corporate Governance and Its Main Problems. This section analyzes the status quo of corporate governance from the ownership structure and control power of Russian privatization; and finds the main problems of corporate governance in present Russia. After the privatization of securities, Russian companies, by and large, realized the structural decentralization of share capital. However, the subsequence followed was that the employees in the company share most of the stocks. Thus, the Russian government adjusted the privatization project. The new project changed the ownership structure of the company in the following three ways: 1. The amount of stocks held by employees inside the company dropped, while the amount by people outside rose. Thus, the employees'stocks were shifted to and centralized in the administrators and people outside the company. 2. The percentage of domestic shareholders decreased, while the percentage abroad increased. 3. The concentration degree of the stock ownership became high. After privatization, the distribution of ownership is featured as following: the companies controlled by the people inside become less; those controlled by outside people become more; and those by the state keep almost the same as before. The pose-privatized corporate governance faces such a problem: rightof taking surplus and control power ill matched, thus leading to "insider control". The board members and managers are actually those heads of former factories, who know nothing about company operation under market economy and therefore keep the company lacking in modernized management system. Companies are subsequently inefficient. The fourth section: The Russian Way of Corporate Governance Reform. This section, with consideration of Russian reality, brings forward the construction of outside monitoring mechanism to solve "insider control"in corporate governance. As to corporate governance structure, the following key questions are crucial: 1. Some conditions inherited from planned economy as well as from the early stage of transitional economy, including ideology, limits the possible choices in the design of corporate governance structure, both politically and economically. 2. Classical shareholder-dominant corporate governance pattern may not be the only effective solution. Any pattern of corporate governance, in fact, can work, complementary with other aspects of economy. Considering the history and the status quo of Russia, economists raise specific "prescription". Prof. Aokimasahiko claims that the credit supervision of the bank functions in beforehand choice of the company's operation. And through bankrupt threat, the bank can afterward-opportune-control the company, and initiate restructure by force. Russian economist Selgienko analyzes the question from two aspects: Compare the efficiency and risks of different monitoring modes; and decide...