The Empirical Research On Self-Supervision Of The Supervisory Board, Property Right And The Controlling Shareholder' Funds Occupation

Supervisory board governance is one of the weakest parts in corporate governance in China. And the agency cost between controlling shareholders and minority shareholders is a hot issue in corporate governance. The controlling shareholders can seriously damage the interests of the minority shareholders through the capital occupation because of the lack of effective supervision. With China's state-owned enterprise executives having been sacked, the supervisory effect of the board of supervisors is into question once again. In 2014, the SASAC made it clear that the government officials shall not serve as supervisors in the state-owned enterprises, this kind of de-administrative action also demonstrates the determination of our government to reform the board of supervisors. Our country is implementing a mixed ownership reform of state-owned enterprises, which also requires companies to adapt suitable supervisory board governance mechanism. Therefore, it is of great theoretical and practical significance to explore the reasons why the board of supervisors does not play its supervisory roles.This paper discusses the board of supervisors' supervision effect on the controlling shareholder's funds occupation from the perspective of self-supervision. The failure of supervision of the board of supervisors is divided into two levels. First is the company's organizational level of self-supervision, that is, the controlling shareholder of the organization under the control of self-supervision. Second is the personal level of self-supervision. Specifically, this paper will discuss supervision effect of the controlling shareholder' fund occupation from the composition of the supervisors, the term of supervisors and the supervisors' shareholding. Moreover, combined with the nature of company property, the paper will further discuss the differences effect of the self-supervision on the controlling shareholder' funds occupation under different nature of property. This paper studies 2006-2014 A-share listed companies, and uses STATA 12.0 to do the random effect model of panel data test. It is found that the real reason of the supervision failure is the self-supervision of the supervisory board.The main conclusions of this paper are as follows: firstly, about the company's organizational level of self-supervision, the higher the proportion of shareholder supervisors, the more the controlling shareholder' funds occupation, the higher the proportion of staff supervisors, the less the controlling shareholder' funds occupation. And the independent supervisor's setting has no significant influence on the controlling shareholders' funds occupation. Secondly, about the personal level of self-supervision, the tenure of the board of supervisors has no significant influence on the holding shareholders' funds. And the higher the proportion of supervisors shareholding, the less the controlling shareholder' funds occupation. Thirdly, the effect of the company's organizational level of self-supervision between the state-owned corporation and the non-state-owned corporation is different. The reasons for these conclusions are the controlling shareholders elect supervisors who represent their own interests by control power, which leads to the board of supervisors and directors represent the interests of the controlling shareholder at the same time. The board of supervisors form self-supervision and are unable to play a supervisory role. Employee supervisors and supervisor shareholding, to a certain extent, can inhibit self-supervision of the board of supervisors. However, the proportion of the employee supervisors is much lower than the proportion of shareholder supervisors, and the supervisor shareholding is not common in our companies in practice. All of these reasons lead to the inhibition effect of employee supervisors and supervisor shareholding have not been fully realized. On the basis of these, this paper presents the implementation of amending the Company Law: election of directors and the supervisors by separation and restricting controlling shareholders of the nomination and election supervisors; pay attention to the supervision right of the staff, staking different actions to staff supervisors by different nature of property; actively promoting supervisor shareholding policy and so on.