Legal Protection Of Shareholder Rights On Corporate Charitable Donations

Corporate charitable giving revives with the growth of market economy from1990s,during which it experienced flood-relief in1998, SARS prevention in2003, Wenchuanearthquake in2008and so forth, and has harvested considerable achievement and become aleading force in Chinese charitable causes. As members of commercial subject, corporationseither contribute to overall significant involvement of economic activities or placetremendous impact on charitable donations. Admittedly, by doing so, it literally benefitsimprovement of corporation image, but also accelerates competitive edge of corporations perse. Nevertheless, where corporations participate in charitable donations, it seems that one ofthe most important issues that is readily disregarded or ignored by the public is the veryprotection of shareholder rights. Benefit of shareholders is the root of corporationdevelopment, any damage to it would be devastating to the long-term advancement of thecorporation. Due to the fact that Company Law in China has just come into effect for just onlya dozen years, mechanism of corporate charitable giving has not yet integrated and in effectturns out incapable of protecting shareholder rights legally. Notwithstanding Public welfareDonations Act admits the legitimacy of corporate donations, yet it has been proven that it failsto effectively handle problems in reality when it comes to shareholder rights’ legal protection.In this paper, it takes an exploring action attempting to design a protection mechanism ofshareholder rights, by means of a general study of Chinese existing literatures and ofdistinguished fruits of developed countries’ legal systems.Apart from introduction and conclusion, this paper is divided into five parts:Part one deals with a general overview of corporate charitable donations primarily basedupon theories and legislations thereof. It begins with a basic category of corporate charitablegiving, and, together with the existing legal system, analyzes its criteria and attributes, andthen arrives at some conclusions in this regard. Next it introduces the fundamental theory ofcorporate philanthropy legitimacy, i.e. corporate social responsibility (CSR). Much emphasisis placed on mutual relationships between CSR and corporate charitable donations so as toshow a definite attitude in this respect.Part two is devoted largely to discussing a necessity of protection of shareholder rights,as far as corporate charitable giving is concerned. It briefly describes the history of anexpansion of corporate capacity in British and American corporations. The expanding corporate capacity eventually causes limits to shareholder rights and results in necessaryprotection hereof. Then conflict of interests is covered, including interests betweenshareholders either corporations or shareholders, for the importance of protecting shareholderrights’ sake.Part three, by taking recent circumstances of corporate donations into account, outlinesimperfection of shareholder rights’ protection in China from four respects, i.e. ambiguity ofdecision-making power, violation of directors’ duty, failure of autonomy of by-law as well asinsufficient disclosure, with a view to standing out an urgent need to protect shareholderrights.Part four mainly concentrates on Canadian, United States and England as of legalprotection of shareholder rights when corporations donate. By comparison, advanced legalexperience that is accessible to China is summarized and concluded.Part five makes up the largest section of this paper, principally involving how toconstruct legal protection of shareholder rights in light of corporate charitable giving. Firstand foremost, most of the discussion focuses on basic principles, that is, autonomy of be-lawprinciple, disclosure of donation information principle and benefits balance principle.Secondly, it designs a blueprint of legal protection of shareholder rights regarding corporationcharities. Based on autonomy of corporation and of by-law, it offers an outline ofdecision-making authority system which contains limits of decision-making power,reasonable amount of donation and procedures of making decision. Given the insufficiency ofdisclosure, it covers the realistic significance of disclosure system and embodies details ofconstruction hereof. Next it manages to reify the surveillance mechanism from the point ofshareholder’s inspection right, inquiry right and proposal right. In the end, it providesshareholder remedies as to direct litigation and derivative litigation with a detailed discussion.