External Oversight Of Corporate Governance, Legal Research

The external supervision of corporation governance aims at monitoring and regulating corporation governance from the outside through the utilization of various methods such as laws and rules, government policies, social power, ethic and morality, in order to make the running of corporation complying with laws and rules, government policies and constitution of corporations. External supervision is just indirect corporation governance since it neither intervenes into the power force inside the corporation, nor interposes the normal running of corporation. On the contrary,external supervision attempts to combine corporations into the whole market economy as a independent market entity, so that a synthesized balance could be kept, while supervision of corporations be carried out. Generally speaking, external supervision of corporation governance often includes several aspects such as macro regulation of corporation's authority, judicatory supervision, social supervision and moral supervision, among which macro regulation of corporation's authority intends to strengthen the government's regulation on the national economy, administer the environment of market, so as to provide a environmental regulation and institutional support for the running of corporations. Compared with the initiative of macro regulation, judicatory supervision is a passive kind, which mainly aims at constraining the illegal behavior of corporations and therefore provide compensation and protection for those injured. Both the two methods of supervision are the embodiment of nation's volition and the utilization of nation's force, thus being very powerful. Social supervision of corporation governance mainly exerts the influence of agency and consumers on the running of corporation, while agency supervises the illegal behavior of corporations by independently external audit, and consumers do this by acquiring legal knowledge to protect their own rights. Moral supervision aims to establish credit system of market transaction, thus urging corporations to conduct self-constraint, produce legally and do business honestly. Although moral supervision is just a moral one without any restriction, under the circumstances of market economy, it has come into a market rule of constraining corporations through the regulation of law. Based on law and rules, all of the four supervision methods construct the external balancesystem of regulating corporation governance, therefore impelling corporations to legally produce, obey the law and rules, maintain the market order, improve their own competitiveness, and finally face international competition with an active attitude.