On The Fiduciary Duty Of The Directors In Listed Company

The relations between company and its directors is the commencement of fiduciary duty, yet it is impossible to discuss the fiduciary duty without the attention to the government framework of the company. An excellent government of the company could benefit to the operation of itself and be a crucial factor to the competitive edge. Since the development of the market economy and the division of the profession, the participation of the professional in the management of the company is inevitable. One trend of the development to the modern company is the vicissitude of the adscription of the administer power—the shareholders of the company endue the power to the directorate. As the investor, the shareholders concern the yield best of all, but they are not the expert of the management of the company, however, the directors of the company, who are the professional staffers of the company management, could operate the company more efficiently and gain the corresponding reward. This institutional arrangement does avail to all sides.However, this kind of pattern has its own disadvantages, which is the so-called agency cost. The separation of the proprietary right and the administrative power is the cause of agency cost. The shareholders wish the directors do their endeavors to maximize the interest of the company which cannot achieve sometimes. The directors manage the company at the front line and control the financing and other resources of the company, and thus the asymmetry of the information between the shareholders and directors could induces the interest making of the directors for themselves. Besides, the income from directors' arduous work belongs to the company while the directors could only gain the promise reward, which is another cause of agency problem.How to control and reduce the agency cost is a very essential question for discussion in the field of company law. At the first place, in order to reduce the agency cost and maximize the interest of the company, the law should regulate the duty to the directors which is the so-called fiduciary duty. At the second place, the design of the fiduciary duty should avoid decreasing the working enthusiasm of the directors or confuse the proper venture with the malpractice of the directors. At last, the content, the standard of judgment, and the liability should be regulated in order to consummate the system of fiduciary duty.The fiduciary duty could be classified as duty of care and duty of loyalty in the aspect of its content. The definition of duty of care could be describe as the director should functions as the director should be, and the course of the performing should be in good faith and the way of acting should for the purpose of maximize the interest of the company as well as its shareholders. And duty of loyalty refers to the innermost thinking of the directors, all the behaviors of the directors should serve the loyalty to the company. In the term of the duty of loyalty, the directors should not make the self-interest priority to the profit of the company or obtain the material assets (capital, reality, etc.) or the immaterial assets (business opportunity, trade secret, etc. ) or hold the post as the agent or copartner of the competitor of the company.The revised edition of the company law and other correlative regulations enact the fiduciary duty of directors, it is an advancement of the legislation. However, the deficiencies still exist in the current clauses that await the improvement.