Conflict Of Interest In Corporate Governance And Balance

The company has hundreds of year history, and the organization become more detailed and complicated along with progress and commercial development. But it remains essentially the same despite all apparent changes, from macro perspective, company is obliged to take up social responsibility, from micro perspective, the company is only a profit-driven means after all and investment instruments focused on capital value added. Just because of this, the various relationships in civil subjects attached to organizations of the company are the relationships of interests in nature. So this relationship involves both mutual benefit and conflict, the conflicts thereof is discussed in this paper.Based on the shares distribution when the company's capital is formed, the author firstly classifies company governance models into concentrated and distributed one. In the case of concentrated model a single or a few shareholders with absolute or substantive advantage in quantity of shares, play a dominant role in organization. Such company includes Liability Company and holding joint-stock company. In the case of decentralized model, the share distribution is even, and the shares are characterized by highly mobility. Such company includes Non-holding limited liability companies, joint-stock companies dispersed absolutely and joint-stock companies dispersed relatively.Then, on the basis of the classification above, the problems of interests'conflict exist under different governance models of corporate governance will be discussed; the main problem of interests'conflict under a concentrated model is that the controlling shareholders fraud and plunder the minority shareholders by taking advantage of the right to vote under the principle of capital majority-rule. The main problem of interests'conflict under a distributed model is the agent cost arising from the power abuse in operation and the losses of shareholders. The problem is due to separating controlling power from the ownership.Finally, the balancing means were raised respectively to tackle the problems of the interests'conflict above, the balancing means of interests conflict under a concentrated model of corporate governance mainly are imposing the fiduciary duty on the controlling shareholders, strengthening all of the specific measures to prevent abusing of capital majority-rule, and guaranteeing the protective rights to minority shareholders to achieve a balance of interests between shareholders. The balancing means of interests'conflict under a distributed model of company governance is imposing the fiduciary duty on the managers, improving internal monitor mechanisms of the company (such as the establishment of the independent director system) and giving the protection of the rights of minority shareholders for power balances .In short, the problem of interest conflict of corporate governance directly related with the company's shareholding structure. The phenomenon contributes to negative affects and undermines company's overall operation. Moreover the phenomenon is inevitable byproducts of joint-stock company system. Now we are faced with capital globalization and the tendency to assimilate company governance model in the international capital market. In the existing legal framework and market environment, it is feasible to maximize balancing the interests'conflict of various subjects in the company and minimize the negative affects. through good system designing and market development。...