On The Protection Of The Interests Of The Founding Shareholders

Recently the battle for control right of GOME has received more and more attention anddiscussion. Although GOME is under the constraint of Hong Kong company law, due to thefact that it’s main market is based in the mainland China, it mirrors Chinese companies inaspects of operation. We should focus and reflect on the interests’ protection problem offounding shareholders. On paper the interests protection problem of founding shareholders,we aim to analyze the reason for compromised interests of founding shareholders and providesome solutions for protecting interests of founding shareholders. The methodology ofqualitative analysis and literature review are applied. The main body is divided into two partsexcluding introduction:The first part is about the analysis on the reason for compromised interests of foundingshareholders. Firstly, there are some faults on constitution design, including unreasonablearrangement of stock rights structure, excessive authorization of board of shareholders andunreasonable constitution of board of directors and operating mechanism; secondly, thereason lies in the bias in constitution operation, and it is mainly about behavior bias ofprofessional managers.In the second part, the methods on protecting interests of founding shareholders areintroduced. In the beginning, a reasonable constitution design is needed accordingly,including “setting double stocks”, reasonable authorization of board of directors, retaining“veto by one ticket” and reasonable arrangement of constitution of board of directors andrunning mechanism. Later the methods for solving the bias about constitution operation areprovided, and on top of this, we state on how to keep on track the behavior of professionalmanagers. Here lies the essence of this thesis.