On The Legal System Of Board Of Directors In Wholly State-Owned Company

One of the key issues on the reform of state-owned enterprises (SOEs) is to establish a standard board of directors, which is deemed as the "last trick" for the reformation. In respect of corporate governance, the current legal system of board of directors is still dissatisfying, which needs further improvement. The process of reformation is slow while the impact is insignificant. The government-enterprise relationship is struggling in a strange phenomenon, between "to delegate" or to "to centralize". Three characteristics of the SOEs, the "dual identification" of the government, the "fictional" owner of the state assets and the complexity of the entrust relationship have been manifested in the wholly state-owned companies as well. Therefore, this article focuses on how to balance the independence of the company and state interests as the shareholder; how to define the relationship between the board and the state as the investor and how the business decision and supervision could be rightly accomplished by the board. Those three aspects this article are also the key issues of of board of directors in wholly state-owned company.This article targets those wholly state-owned companies designated as the tests of board reformation. Due to the special nature of its corporate governance requirements of the wholly state-owned company in China, it will inevitably generate problems those are different from the general commercial companies. There are various obstacles encountered in the project, such as the lack of eligible right of board, the insufficient implementation of board responsibility and the non-regulated status of board mechanism, etc. The above issues stem from the absence of corporate governance concept which interfered by the traditional philosophy, as well as unduly interference from the administrative authorities, which leads to the legal shortfall of the current rules on board. Furthermore, through comparing the rules of other western countries with those in China, it is suggested that the board system should be improved based on the current national conditions while effective approaches should be adopted accordingly by means of exploring the insufficiency of the application and the establishment of this policy in China. In conclusion, the purpose of this article is to enhance the legal system of board of directors in state-owned companies by suggesting feasible approaches regarding the improvement of current legal situation, and to provide useful references for China to practice its modern enterprise system reform.