China's State-controlled Commercial Bank Corporate Governance

While the commercial bank is specialized in dealing with money and credit, it as an enterprise shares the common properties of enterprises, so the connotation and theory underlying the company's control and management of commercial banks can be explored following almost the same method as in the study of general enterprise companies.There has not been a concentratious definition for the company's control and management by now. Economists both at home and abroad have set forth various theories about it from different angles, among which the typical are system theory, strategy mechanism theory, organization framework theory and relationship contract theory, etc. According to the author of the present paper, the company's control and management should be defined as the "software-hardware" system and practical activities which are established on the corresponding organization framework, series of relevant systems and regulations, and which could keep the enterprise normally operating under ever-changed circumstances. Company's control and management will experience a continuously improving process through adjustment. In addition to considering the connotation of general enterprise's control and management, the bank-company's control and management should be subjected to continuous dynamic adjustment so that the power and distribution in the bank could effectively be restrained and balanced.Of the fundamental theories about company's control and management, only the entrustment-agency theory, interest correlation theory and super proprietorship theory have been introduced in this paper for the reason that they are closely related to the subject of this research and provide a solid theoretical foundation for the study of bank's control and management.The conclusions drawn by foreign economists in the study of bank's control and management are that measures should be taken to promote private ownership, strengthen transparency and competitive ability by introduction of funds from abroad. On the other hand, Chinese economists have focused their research on the change in the proprietorship system. Yet with the deepening of their investigation, many of them have realized that all problems encountered in company's control and management could not be solved based on proprietorship reform alone, the coordinated reform of its related systems must also be emphasized. Strategies in general enterprise company's control and management could be used for reference but not copied mechanically in the bank's control and management because of the bank's peculiarities which include the peculiarity of capital structure, low information transparency, diverse risks, vulnerability and risk infectivity. It is the bank's peculiarities that determine the specific characteristics in its control and management such as unsymmetrical information. complicated entrustment-agency relationship, government's intervention, bank's control and market circumstances.A variety of models of bank's control and management have been conceived worldwide under different conditions of politics, economy, history and culture. The representative models of bank's control and management are English-American market-oriented model, German-Japanese bank-oriented model and Southeast Asian clan-oriented model. In this paper, all the three models above were analyzed with regard to stockholder equity structure, organization framework, stock-holding form, stock-holding stability and inactive-restraint mechanism and conclusions were drawn as follows: good law conditions constitute a favorable background for bank's control and management, explicit proprietorship and entire effective organization framework are a prerequisite for good bank's control and management; effective incentive mechanism is a guarantee and market circumstances are a security.The predecessor of Chinese national holding commercial bank was the state-owned commercial bank which grew out of the state-operated bank under a planned economy system, and therefore commercial bank has been strongly affected by the concept of traditional bank's control and management. Under the said planned economy system, the most characteristic feature of state-owned banks was the government's administrative intervention and political control. After adopting the policy of economy system reform in China, state-owned banks were subjected to the reform leading to specialization, business operation and commercialization. In order to adapt the new situation caused by entering into WTO, a stock-holding system reform was carried out in state-owned banks, as a result, three state-owned banks-China Construction Bank, China Bank and China Industrial and Commercial Bank, were transformed into state holding commercial banks. A setup for company's control and management consisting of stockholders' general meeting, board of directors. Supervisor committee and high-ranking supervisors was established in the three banks. However, there are still many problems left in the state holding banks. Problems of control and management inside banks are: imperfect organization framework, inadequate incentive, weak supervision, low level of information technology and imperfect information revealing system. Problems outside banks are: incomplete law and regulation system, immature banking competitive pattern, scarce bank markets and slow development of capital markets.The documents issued by Basel Bank Supervision and Management committee are so far the most widely accepted and most influential documents concerning company's control and management.The international standards set in the documents provide valuable reference material for us. Meanwhile it should be kept in mind that all these standards were generated under the conditions of west developed countries, hence they should be made to conform to the actual situation in China before they are applied here. The company's control and management in China's state holding commercial banks should adhere to the following principles: standardization principle, balance and authorization principle, faith, public transparency, incentive-restraint symmetry, and efficiency principle.The government's role could not blindly be denied in connection with the peculiarity of China's banks. Suitable policies should ensure that the government's administrative power would gradually be loosened and withdrawn form banks, the inner restraint in banks gradually strengthened, and in this way a balance between inner and outer restraint would be reached-this is the ideal goal model to be attained in the company's control and management of China's national holding commercial banks.For optimizing the company's control and management in our national holding commercial banks, the following measures should be taken1, Establishing an evaluation system of company's control and management which acts as the evaluation standard for the goal model in the bank's control and management and also a standard for the bank's construction2, Perfecting the inner control and management: (1) perfecting organization framework, including perfecting general stockholder meeting , shaping an aggressive board of directors and making independent directors professionalized, improving the quality of supervisor committees work.(2)seeking active and effective incentive mechanism, including money incentive and non-money incentive.(3)building information technology system.(4)establishing complete information revealing system.(5)perfecting financial holding groups and realizing mix operation.(6)creating business culture with special characteristics3,Perfecting outer control and management:(1) government intervention: completing laws and regulations, shaping healthy macroscopic economic environment.(2) market circumstances: creating fair and orderly competition environment, accelerating the building of manager markets, fully developing capital markets.(3)strengthening social independent auditing supervision.(4)promoting the reform of Chinese financial system by bank supervision and management committee.