Check And Balance System On Director's Power Exercise

The essence of corporate governance is the mechanism of balance of power within the corporation, in other words, the mechanism of balance of rights among shareholders, directors and supervisors. Power extension or power recession of any organ will destroy the balance of the interest system, restrict the development of the corporation and damage the interest of a certain group. Corporation is under a rapid developing speed since the 20th century, which reduces the shareholders'chances to participate in the business decision. In the corporate governance structure of our nation, directors'control on corporate business is far beyond the legal limitation. Therefore, how to control the board of directors receives the attention from both the academic and practice side. But as to the fundamental mission of the corporate governance, the problem is basically on how to control the director-right-exercise in different stage. The reason why the issue is important is that the director is on the top of the power pyramid of the corporation power system and the director is the virtual controller of the company, whose behavior directly influences the future and destiny of the company. What's more, the director-right-exercise control is a complex problem which must resolve how to control the director-right-exercise in different stage, so as to fulfill the double aims of corporate governance, that is, firstly, control the director-right-exercise within the range of the corporation's objection and value system, make sure that the director's decision is beneficial to the corporation and whose shareholder on both the present and future benefit, secondly, adapting to the practical need of professional management, define reasonably the fields and ways on controlling the director-right-exercise, lest bond the directors'vigor and enterpriser's talent. For this reason, this thesis probe into this problem in four aspects.The first part discusses the legal limitation of the directors'right. This paper analyzes the nature of the directors'right on theory view: the directors'right is the mixture of occupying director position, having director right and carrying corresponding obligation, including power, right, duty and obligation. Directors'right is rendered by the law: Corporation Law of PRC lists the right that directors have and the range and method to exercise it. However, the director-right-exercise is influenced by the articles, Shareholders Meeting and shareholders, As for the content, the core of the director-right-exercise is the business decision right and businessThe second part involves the pre-control system about the director-right-exercise. The pre-control system mainly restricts the qualification of the directors. The qualification is the conditions to meet for directors, which decides whether one could be selected into the Directors Board and owns the directors'right. It is also the first step to avoid the mediocre members in the Directors Board. Therefore, most of the western nations limit the qualifications of the directors.The qualifications for directors always include the positive qualifications and the negative qualifications. The former one indicates what conditions have to be met to be selected directors, such as the nationality, qualified share and age; and the latter indicates the limitation conditions, such as the morality and profession requirements. The Corporation Law of PRC does not describe the positive qualifications but the negative qualifications in article 147.The third part emphasizes the interim-control system about the director-right-exercise. The interim-control system appears to be the supervision on the business action of the directors, which requires the directors'action to meet the law and the articles of the corporation. If the pre-control system emphasizes the preparation, the interim-control system is to avoid illegal matters by supervision. The interim-control system mainly includes the supervision on the Directors Board decisions and the perfection of the directors'obligations. The supervision on the Directors Board decisions is to check whether the deciding procedure and the decision is legal. The perfection of the directors'obligations includes the perfection of the duty of loyalty and the duty of care. The emphasis of the duty of loyalty makes directors being honest to the corporation and not to harm the corporation interests; the emphasis of the duty of care makes directors understand the business and management of the corporation in details, improve the managing and deciding ability, and keeps the corporation to develop rapidly.The fourth part narrates the post-control system about the director-right-exercise. The post-control system is mainly to focus on the obligations of the directors. Directors obligations are defined to be the legal consequences the directors have to take for violate the duty. The major situation that directors take the obligations includes: participate the illegal decision; violate the Directors Board decision; violate the duty of loyalty and the duty of care; violate other obligations and cause the lost of the corporation. The obligation includes civil obligation, the administrative obligation, and the criminal obligation. Besides that, the practical litigation routine is also needed.