The Role Of The Board Members In Chinese Corporate Governance:Predicament And Optimization

The governance of board members' liability is a vital part of the corporate governance.This paper mainly discusses the governance of board members' liability from both theoretical and practical aspects,focusing on the model,experience,predicament of the construction of board members' liability protection program,as well as the recommendation of relevant system building.Global corporate governance can be approximately divided into two types:external control and internal control.Law in the Republic of China depends on the civil law system,though the development of China's economic system reform draws the lessons from the experience of Anglo-American law countries,forming a mixture of corporate governance system between the civil law system and the Anglo-American law system,which has a strong mixed characteristics.China should neither put too much emphasis on one single model nor grafting models such as Anglo-American model or German model onto China's corporate governance policy".However,China should innovate a corporate governance model which fully reflects the experience from other countries and is indeed distinct from other countries' models to establish an invigorating and evolutionary mechanism of corporate governance model based on China's fundamental conditions.The purpose of such development is to search for and build a modern governance model that is most suitable for Chinese corporations.Specifically,in the revision of the "Corporate Bylaws",it's crucial to gradually increase the autonomy and flexibility of the distribution of power between the shareholders and the board of directors.In addition to the part of the power that must be divided,corporate bylaws should also allow the corporate policymakers to have a certain discretion in the process of drafting of the corporate bylaws while increases the leadership role of the board members in a reasonable range,progressing and promoting the needs and efforts of board member's liability program.There are many problems in the status of board member's governance in China.The main aspects are as follow:First,the object of board members' liability is limited to the company and the shareholders,not the creditor,the employee,the competitor,the regulatory,the community and other related stakeholders.Second,the loyalty norm of directors is more detailed than duty norm.Third,the administrative responsibilities,criminal responsibilities are more than civil liabilities.Fourth,there is a procedural obstacle within the construction of board member's liability protection program,such as insurance must be approved during the shareholders meeting,adding the preconditions of the claims on administrative penalty and unusual criminal charges.In the practice of board members' liability protection in China,comparing the comparative analysis of Wanfu Biotechnology's false statement and inside trading case in Everbright Securities and insurance coverage of domestic to overseas listed companies' record has shown that the board members' protection program insurance in the companies which listed in overseas(Hong Kong,the United States and other places)are in a much better condition than the domestic enterprises'.It is suggested that it is necessary to weaken the liability of the legal representative and strengthen the responsibility of the board members,due to the fact that China's law highlights the legal person's responsibility with less focus on the relevant natural person's responsibility.In the rise of the entrepreneurship in China,the most important factor is to inspire the passion and enthusiasm of Chinese entrepreneurs,while increasing the responsibility of entrepreneurs,including civil liability that should have been borne by the entrepreneurs instead of corporate legal representatives.On the other hand,it is necessary to refine the objective criteria of the board members' attention obligations(diligence obligations)in the corporate bylaws(especially the listed companies),and to increase the liability of board members to fulfill their obligations.At the same time,supplemented by the principle of commercial judgment to appropriately remove board members' liability,and establish the company's compensation system for them.When piloting the system of board member's liability protection program,it could be piloted in the listed companies and financial institutions at first;secondly,administrative responsibility could be treated as a subject of board members' liability insurance.Last but not least,liability protection program for board members should be set up differently based on job,merits,responsibilities,rights and their obligations as stated in the corporate bylaws.