Corporation Governance: Decreasing Interior Risks Of Enterprise

On the ground of the theory of contract and other related theories, this paper aims to decrease and even eliminate the interior risks of the relationships between trusting and deputing in corporations. By employing game-playing theory and the theory of economic controlling analysis, the study emphasizes both limitedness and two-way moral risks for the trustors as well as the deputies. This paper can deepen your understanding and mastering on the reality and better the practicing of the theory of trusting and deputing. To be more detailed:On the basis of defining the meaning of corporation management, this paper analyzes the possible development of the two levels of managing a corporation, and exposing the possible existence of two-way moral risks and game-playing in management. Meanwhile, this paper, from the perspectives of morality in both corporation and society, provides the logical explanation for the development of two kinds of management under the theory of incomplete contract.Generally speaking, "interior risks" derives from the two-way moral risks of the relationships between trusting and deputing in corporations. Therefore, by analyzing the model of "interior risks", this paper draws the following two conclusions. The first: within the period of incompletely informed and repeated game-playing model, even the weaker, in order to maximizing ones benefits, would act out the basic measures of the stronger to achieve the more prosperous economic profits for the corporation without depriving of the surplus values of the managers. The second: to eliminate the moral risks of deputies, the owner of the corporation can only get the compensation for the managers within the period of innovating. In this way, the managers would work harder to perfect their management but not worsen the results of innovation. This paper locates the direction of development just on the solid ground of the careful research on the growth of "interior risks" in the corporations.Furthermore, this paper testifies the conclusions within the experiences simply: 1) expounding the relationship among the property right, cost deputing and deputing efficiency, within the structure of socializing the capital of corporations; 2) proving the limits of the controlling right and the profits of controlling rights in the system of stressing the related benefits of the middle and small stockholders; 3) proving the characters of the activities of game-playing among the corporations of different types of property rights form the viewpoints of marketing.