Improve The Governance Structure Is The Fundamental Way To Eliminate The Bad Behavior Of Listed Companies

The focus of a company's housecleaning mechanism is on the proxy and agencyrelationships resulting from the disparities in the interests or goals of all who areengaged in running the company due to the separation of the ownership and the rightsto run the company. Publicly listed companies in China are controlled byshareholders' meeting, board of directors, supervisory board and company manager,representing separate powers and interests.Currently, the problems occurring to a publicly listed company are concentratedin sham financial reports, manipulation of profits, majority shareholders'appropriation of company capital as well as illegal guarantee, fraudulent trading andrevelation of falsified information, etc.The reasons thereof can be summarized as, firstly, the inherent deficiencies of apublicly listed company resulting from the unreasonable shareholding structure andthe malfunctions of relevant governmental bodies, secondly, the failure to function ofelements in the company's housecleaning mechanism, and thirdly, the lack ofrestricting powers from outside.Faced with the above-mentioned problems, the following corrective actions oradjustments must be made: firstly, the fundamental issue of the shareholding structureshould be resolved by changing and reducing shareholding concentration,standardizing the state shareholding management, putting more restrictions onmajority shareholders, solving the problem of the separation of shares and powers,encouraging minority shareholders and organizational investors to be activelyengaged;secondly, the supervisory system should be improved and strengthened byperfecting the system of shareholder's meeting, reinforcing the roles of the board ofdirectors as well as independent directors, specifying definitely and enriching thework scope and powers of the supervisory board, encouraging and limiting themanagement, etc.;and thirdly, social environmental factors conducive to a company'shousecleaning should be created by putting relevant laws and regulations in place,reinforcing the frontline supervision and fostering social monitoring habits.The efficacy of a company's housecleaning mechanism relies on theimprovements on and the upgrading of the shareholding structure, marketenvironments and internal organizational structural setup. By doing so, a company'sefficiency and level can also be increased and its value will be optimized andsocialized, thus making a publicly listed company a cornerstone for the healthy andsteady developments of the capital market.