Comparative Research On The Interior Supervisory System Of China And America

Under the modern system, the power of controlling one company goes to the operator's hands due to the problem of agency and high separation of shareholders, which frequently leads to failing corporate governance. Generally, the centralism of the board of directors and managers will detriment the interest of shareholders' and employees'. The worst case will give rise to radical strike to the whole system of market economy and even destroy the basis and safeguard for developing economy in a country. On the other hand, sound corporate governance can improve the environment for investment pretty much. Many investors are willing to invest in a company which possesses good social image at an exceeded price, which fully proves the great importance of sound corporate governance.Although the companies' interior supervisory system in our country has primarily possessed the running regulations and governing functions required by a modern corporation, its structure is way too far from perfect. For instances, the effect of the board of shareholders and supervisors are actually in vain and there is no such an effective power-balanced system that has been set up widely. The governing organ, procedure of decision-making and system of appraisement need quick reforms and perfection. According to some scholars' researches, the imperfect corporation governance is the main reason to explain listed companies' year-after-year decline in profit. All these alarmed the listed company that the urgent affair is to set up a whole set of controlling measure both inside and outside of the company. Of course, theestablishment of the interior controlling measure should center on setting up effective supervisory organs and systems.For a long time, people have considered American corporation governance as a typical model which featured on the pattern of extremely-separated shareholders and the domination of managers'. But the successional scandals of Anron and Worldcom made people come to see American style is not the perfect answer, which tells us that no matter the market economy is just burgeoning or has been matured, dishonest behavior in corporation governance is hard to be shunned away due to the agent relationship. So there is no such corporation governance as perfect in the world. Corporation governance, especially the implementation of effective supervision has become a global topic. However, no matter the continental system of board of supervisors or the American system of independent directors, their function and efficiency have been increasingly oppugned and reviewed.There are two creative points of this essay. One is the comparison between Chinese system and American system; the other is the comparison between interior supervision of the two countries, which is established in the ultimate difference between Chinese legal tradition and that of America's. This essay also further clarifies existing problems and malpractice in corporation governance under current legal regulations of our country by making comparative analysis and research on Chinese and American interior supervising system comprehensively. Meanwhile, based on the inherent systems of our country, we hope to learn from American legislation some innovation to improve our own interior supervisory system, such as importing discipline of company opportunity and self dealing to strengthen director's duty of loyalty, giving each company the freedom to decide which management pattern is the best suited one, for it is the company itself knows the actual situation not any legislator. With the globalization of capital market throughout the world, laws and regulations of every nation come nearer and nearer day by day, which has made learning from each other so necessary.This essay is divided into five chapters. First chapter makes comparison on the texture of interior supervision in a listed company in five sections includingcomparison on theoretical basis, governing pattern, shareholder structure, external market and corporation culture. The second chapter makes comparison on interior decision-making supervision in three sections including supervision by the board of shareholders and directors and on the decision's legitimacy of content. The third chapter compares interior supervision on execution, which is divided into four sections including directors' duty of care and loyalty, directors' obligation and comparisons between the independent director and the board of supervisors. The fourth chapter makes comparisons on interior financial supervision in two sections including financial supervision of America's and that of China's. The last chapter uses American system for reference and sets forth some suggestions on the perfection of our country's interior supervision.