Research On Judgement Standards Of The Directors And Senior Executives’ Duty Of Care

In Company Law of PRC(2005), articlel48.1,it clearly stipulates that directors and senior executives own duty of loyalty and duty of diligent to company. However, there’s no further regulation for the meaning and judgement standards. When the Board becoming the core of corporate governance, the shareholders and the company set forth higher requirements for the quality and standards of the directors and senior executives’ management decision, in order to prevent directors and senior executives from abusing its discretion. That is, directors and senior executives shall fulfill reasonable duty of care in the business decision-making process. However, the absence of legislation on directors and senior executives’ duty of care, especially the unknown judicial referee standards, leading to the absence of judicial oversight.This thesis, which based on the subject of the judgment standards of directors and senior executives’ duty of care, analyzes Chinese companies’ background environment through a comparative way, balances the pros and cons of interests between the investors and professional managers. Finally,this thesis concludes that it is necessary to establish the directors and senior executives’ duty of care in company legislation of China. What’s more, there do exist some problem in Chinese corporate governance, such as controlling shareholder centrism, ineffective external market regulation mechanism, dummy corporate governance structure of state-owned enterprises. Therefore,when designing the judgement standards of directors and senior executives’ duty of care in judicial practice in China, we should target to address these issues, establish enhanced business judgement rule.