Supervisory Board Legal System

Modern corporation has the function of raising capital. It has greatly promoted the development of economy since its birth. While the modem corporation is promoting the economy, its property is changing. The ownership of stock is separated from the ownership of corporate and the ownership of corporate is separated from the power of operation, so the ownership is separated from the power of operation. The issue of how to control the behavior of the controller and protect the benefits of the shareholders has been paid more and more attention. People have adopted various ways to resolve the matter. Establishing supervisory board is one of the important means. In addition, because of the theoretical development of corporation community responsibility, the corporation has become the corporation of all shareholders, creditors and workers. The supervisory board should protect the benefits of all the bodies. Our company law arranges for the supervisory board to supervise the operators. But the provisions of supervisory board in our company law are vague. This is disadvantageous to supervisory board functioning. So we should revise the relevant provisions. This paper is divided into four parts to inquire into the issue.The first part inquires into the theoretical base of the appearance of supervisory board. In the modern corporation, the ownership of property is divided into the ownership of stock and the ownership corporate property. Shareholders own the company but don't have the direct contact with the corporate property. Company has the ownership of corporate property, but the power of control is in the operators' hand. The separated power needs control. Absolute power corrupts absolutely. The separation of power results in the creation of agency costs. For lowering the agency costs, a kind of valid means is establishing supervisory board to inspect the agent. When controlling shareholder exists in the company, for protecting the benefits of related bodies, it is necessary to found the supervisory board to supervise the behavior of the controlling shareholder and its representatives.The second part introduces the system of supervisory board of Germany and that of Japanese, compares them with the independent director of America,and analyses the mode of canceling supervisory board and that of the supervisory board acting with the independent director and Germany two-tier Board structure, and puts forward that we'd better adopt the Japanese two-tier Board structure. In fact, our company law adopts that model but the related concrete provisions are rather vague and general.The third part analyses the pervading problems in Chinese company supervisory board system. As for the model of company supervisory mechanism, Chinese Company Law adopts the way of establishing a supervisory board to employ the supervisory power specifically. In practice, the issue of the supervisory board is that its function is nominal. One of those many reasons is the specified provisions of the supervisory board system is unreasonable. As for the members of supervisory board, Chinese company supervisors are not very independent, who are restricted by the managing staffs supervised by them, and their knowledge level and capacity are not good; their authority of office is not suffice and there is a lack of security for the employing the authority; the efficient binding and driving mechanism is in need. All of the said weak points limit the supervisory functions of the supervisory board.The forth part brings out the suggestion to improve Chinese company supervisory board system aiming at the problems showed in the third part. As for the constitute of the supervisory board, the thesis suggests that it should be composed of the representatives of shareholders, workers and creditors; the number of the supervisory board should be provided in accordance with the requirements of different companies; positive qualifications as well as negligent qualifications should be provided for the supervisors. The representative right of company is supplemented f...