Legal Study On Director-nomination Rules Of Listed Companies

This dissertation mainly studies the right of nominating directors in big publiccompanies. In America, the mechanism is called"Shareholder Director NominationProposed Rule".In Chapter One the paper introduced the background and the content of thismechanism. Reflecting concern over the lack of accountability of corporate directorsand recent corporate scandals, US's commenters generally urged the Commission(SEC) to adopt rules that would grant shareholders greater access to the nominationprocess and greater ability to exercise their rights and responsibilities as owners oftheir companies. This brought Shareholder Director Nomination Proposed Rule intopeople's comments. Rather than mandating a "universal ballot," the Commissionrevised the bona fide nominee rule to allow shareholders seeking minority boardrepresentation to "fill out" a partial or "short slate" with management nominees, thusmaking it easier for shareholders to conduct an election contest in a non-controlcontext. Where there are objective criteria showing that the proxy process may beineffective, the company would include on its proxy card the shareholder nominee ornominees and would include specified information, such as biographical information,about the shareholder nominee in the proxy statement.In Chapter Two, the paper indicates that the rational basis for director nominating mechanism. With the help of many economical theories and jurisprudenttheories, it sketches the fundamental theory of the mechanism. Thus , giving themechanism a rational interpretation in the process of applying. This paper absorbs theknowledge and disciplines from areas of economics and law, trying to seek thejustification basis for director nomination mechanism.In Chapter Three, the dissertation analyzes the advantages and disadvantages ofthis mechanism. There are many advantages to accept this mechanism, including it isan effective means of providing shareholders with the rights of company ownership,such reform also would have the effect of making all corporate directors moreresponsive to shareholder concerns, the reform was particularly necessary in thosecases where the proxy process and shareholder communications were ineffective.Another argument in favor of a shareholder access mechanism is that it wouldimprove the exercise of the shareholder franchise when utilized. It would provideshareholders with a proactive means to hold management accountable to its guaranteeto maximize shareholder wealth.Also, there are many counterpoint critiques on this mechanism such as potentialcosts of the rule outweigh its benefits, risk of an influx of special interest directors,creation of an adversarial relationship between directors and shareholders, risk ofbalkanized and dysfunctional boards, risk of deterring the most skilled men andwomen from serving on public company boards, etc. Indeed, those who opposeshareholder access might do well to reexamine their (biased) motivations in light ofthis discussion.In Chapter Four, the paper associates China with this rule. After probing intoChina's public companies, it finds out that the right of nominating directors is seizedby those controlling shareholders. It is high time for China to adopt this kind of rule,so that China's public companies will gain a high level of company governance.