Research On The Governance Effect Of Blockhonders’ Directors, From The View With Agent Cost

From an agency cost theory perspective, this paper mainly investigates thegovernance effect of blockholders’ directors on first kind agency cost. As the mostpowerful internal supervisor and decision maker in the corporate organizational structure,board of directors is the nexus of shareholders and management team and core of corporateinternal governance mechanism. As is known to all, the independence andprofessionalization of board of directors has influenced the result of corporate governancein most cases. In our country’s practice, as the majority seats owner of the board, theblockholders’ directors representing blockholders’ interest play a fuzzy role in supervising.Temasek’smodel provides us an meaningful case as the ownership structure in our countryis highly concentrated: features of the high degree of independence of the board,blockholders’ decentralization and low percentage of blockholders’ directors in the boardweakened the direct interference of blockholders to the board, so that the effectivegovernance of agency problem by the board is guaranteed. SASAC (State-owned AssetsSupervision and Administration Commission) in our country and the management team oflisted companies give full affirmation to the Temasek’smodel and actively put into trial usein practice, in order to achieve the objective of separation of government fuctions fromenterprise management, reduction of blockholders’ intervention, improvement ofgovernance mechanism of the board and reduction of the agency cost. In such context, byusing the empirical data of the listed companies in our country, this paper tested thecorrelation of blockholders’ intervention and agency cost to verify whether or not theTemasek’smodel can effectively control agency cost under our country’s systembackground.This paper has six following parts. The first part is the introduction,stating thebasement and background of this paper that the blockholders’ directors has the majorityseats in the board in the listed companies’ practice and the research blankness ofblockholders’ directors in theory; then, it comes to the theory review and the emphasize ofthe core position of board in corporate governance and the prerequisite of itseffectfunctioning: sending mechanism and independence, at the same time we reviewed theachievements and deficiencies of the existing research. The third part introduces thecharacteristics of the board under Temasek’s model, and then redefined blockholder’sdirectors and raised the hypothesis: the blockholder’sdirectors conduct weak governance effect, and their intervention to the board should be reduced. The fourth and fifth parts areempirical research and result analysis; the sixth part summarized the research result of thispaper and made comments to the state-owned companies in our countries drawing on theexperience of Temasek’s model.This paper researched the governance effect of blockholders’ directors from anagency cost perspective and provided an new practicing methods to the board governancein the case of concentrating ownership by testing the listed companies in our countryconducting Temasek’s model. However, policy maker and market participator should payattention to certain differences exist between Temasek’scompany in Singapore and thelisted companies in our country in practice: the state-owned listed companies in ourcountry commonly apply multilayer control structure, focus on single business and thepolitical association of the sended directors are different from the Temasek model thatapply one layer structure, pursuits diversification in strategy and the market orientedhuman resource selection mechanism. So, we should care the common-effect of bothinternal and outside governance in the practice of Temasek’s model, improving thenormalization of the control chain and actively exploring a corporate governancedeveloping path that suitable for the state-owned companies in our country.