Comments On The Betterment Of The System Of Board Of Directors In China's Company Limited By Shares

With China's entering into a period of a more prosperous economicdevelopment, corporation has become the most common form of businessorganization. Good or bad corporate govemance will be fatal to the enterprise's futuredevelopment; board of directors is the core of govemance of corporate entity.Economic globalization is accelerating and the scale of corporation geometrically isexpanding, which brought out "centralism of board of directors" in legislation ofcorporation law. The power possessed by board of directors is expanding, thus theinterests of shareholder are often infringed. Under such intemational background,many countries response to control the quick-expanding power through legislation,and make some provisions for supervising such power, strengthening theresponsibilities of directors in board's governance, the reform and construction ofboard of directors become the topic in corporate govemance. In addition to the sameproblems existing in other countries, China has more problems press for solution,which are rooted in specific economic and cultural background. Accordingly, how toconstruct the system to supervise and balance the power of board of directors, andinspirit and restrict the directors is the urgent fair. The theme of this article discussedbellow focuses on maximizing the value of corporation and share holder through theway to establish a system of governance in which there exist distinct power andresponsibility, harmonious operation, and a system of checks and balances in board ofdirectors.This article of 34000 words is divided into 6 parts:Section 1, Summarization of board of directorsStarted with the historical development of board of directors, this chapterpresents to us the legislative change of company limited by shares in west countriesfrom "Centralism of general meeting" to "Centralism of board of directors". However,the policy of centralism of board of directors is still accepted in China's corporatelegislative body. It intends to further deduct the orientation of board of directors incompany limited by shares from China's laws and regulations currently in effect.Section 2, Organized system of board of directorsThis chapter analyzes the problems in four aspects existing in organized systemof board of directors based on the establishment, structure of board of directors, andemployment requirement for director, which resulted from the structure of stockownership and insider control in China's company limited by shares, and furthermoreproposed pertinently some measures to better them.Section 3, Board of directors' authority Firstly, this chapter analyzes the mode of stipulation on board of directors'authority in China's corporation law, and reaches the result that the list pattern onboard of directors' authority is not according with the trend of "Centralism of board ofdirectors"; Secondly, it analyzes some aspects in operation of board of directors'authority, for example, the chairman of the board, special committee, independentdirector, executive officer and so on, in order to straighten out the relation among theoperation of power.Section 4, Mechanism of supervising and restricting board of directorsEnlargement of power of board of directors is in the need of corporatedevelopment. Simultaneously, on account of controlling stake's abusingpredominance, controlling board of directors, infringing other directors' interests, it isvery essential to enhance and better the supervision and restriction to the execution ofpower of board of directors in many ways. This chapter attempts to construct asupervisory system in a wide area from inside chairman of board, independentdirector to outside shareholder, general meeting and board of supervisors.Section 5, Director's rights and dutiesBoard of directors operates by entitling to directors as representatives. On thecontrary, director must exercise his rights and perform his duty in the utmost benefitsto corporation and all directors. This chapter firstly analyzes the jurisprudencefoundation for director's rights and duties, then presents director's rights and dutiesrespectively, and emphasizes that director should assume more duties and liabilitiesgrounding on the development status of China's company limited by shares.Section 6, Mechanism of director's incentives and inhabitingTo establish a mechanism of inspiriting and restricting director is necessary toensure director to manage corporation effectively. This chapter explores to establish asystem of assessment on director's performance so as to provide different assessmentcriterion for varied kinds of directors. Then it laid stress on mechanism of restrictingdirector, enhancing director's liabilities and bettering exemption system from theparticularity of structure of share rights and current status of company limited byshares.