Empirical Study On Control Power Allocation Of Chinese-foreign Joint Ventures

Joint ventures are the main form of china's introduction of FDI. According to enterprises theory, joint ventures are corporations which are established through multi-layer client-agent relationships and carry out production and operation directly, seldom owned by natural persons. The degree and way of parties' control over joint ventures is relatively complex, because stockholders can invest to joint ventures in form of cash, physical assets, property rights, land employment right and so on. Besides, the control over joint venture decides the earnings and achievement of strategic goals of respective parties, therefore the struggle for the control rights, which is very intense, become the focus for stockholders.In many cases, Stock Ownership will be main way stockholders participate in the control, if other ways can't achieve the control goals effectively. Although stock ownership can't decide the control power directly, but it has become the main way for parties to get control power and the basis of implement of other ways. Investors of joint enterprises can be divided into Chinese joint ventures and foreign joint ventures; their ownership proportion can basically reflect the results of control over joint ventures.The arrangement of board of directors and managers, especially the appointment of chairman and general manager, is the main method for the parties to exert control on joint ventures. As corporate representative of joint venture, chairman has the rights to summon the meeting of directors, while president take charge of production and operating activities, so the key of effective control lies in the control over the two positions. Because all the important decisions should be voted by board of directors, proportion of directors in the board decides whether the investor's strategy can be realized or not, and the proportion of directors is positively correlational to the ownership proportion of the parties. According to the survey, Chinese joint ventures have more power on chairman when having superiority in ownership. Because of policy limitations in getting controlling stake, foreign joint ventures tend to appoint president to control the production and operating activities to protect their own interests. The arrangement of chairman and president is partly but not obviously correlational to ownership proportion.Dual Role of the Board Chairman is propitious to complete control over the venture and instant decision-making, however, it is difficult to realize this centralized mode, which is affected by several factors, especially the influence exerted by the parties, and partly correlational to ownership.