Study On Effective Governance Mechanisms For The Board Of Directors In China’s Private Enterprises

Under the constant influence of economic globalization and the US sub-prime mortgage crisis, the demand for effective corporate governance is growing. As China’s private enterprises play an important role in the national economy and the board of directors play a central role in corporate governance, which make the study of governance mechanisms for the board of directors in China’s private enterprises become more and more necessary.Firstly, based upon the combination of research findings from domestic and international and relevant theories, such as agency theory, enterprise resource theory and stakeholder theory, this paper further elaborated the core theories and concepts of corporate governance, the board of directors, the board of directors’governance mechanisms and efficiency to form a solid theoretical foundation.Secondly, this paper focused on the analysis of poor performances of the board of directors’governance in China’s private enterprises, then on the basis of full understanding of issues in all aspects of the board of directors in China’s private enterprises, with the purpose of improving the efficiency and functions of the board of directors, this paper started from the functions of the board of directors, analyzed a certain amount of internal and external governance mechanisms and characteristics which it should have. Finally, under the guidance of effective internal and external governance mechanisms and characteristics for the board of directors, this paper provides policy recommendations against current poor performances of the board of directors’governance in China’s private enterprises, which is also the significance of this paper.We find out that there are many poor performances of the board of directors’ governance appearing in China’s private enterprises, such as serious "virtualization", lack of interactive relations between the Board members, inadequate incentives, imperfect external governance mechanisms and insufficient functioning of the Board as well. China’s private enterprises should improve the effectiveness of its board governance, and thus improve international competitiveness through these aspects like improving the independence of the Board, creating more incentives, optimizing better external governance environment, cultivating corporate governance culture respectively.