On The Selection And The Establishment Of Chinese Listed Companies' Governance Mode

This paper discusses directorate oriented corporate governance system, or thecorporate governance system of Directorate Centralism ("Directorate Centralism"),the practicability and necessity of its implementation in China's listed companies, andthe setting up and reform of related legal systems. The goal for adopting theDirectorate Centralism system in China's listed companies is: (1) Setting up the legalfoundation for board of directors in China's company law;(2) Investing the board ofdirectors with independent business decision-making power;(3) selecting andappointing directors in a more diversified manner;(4) Ensuring directors to exercisetheir decision-making and supervising power in a more efficient way;(5) Reasonablyprotecting the directors' decision-making power;(6) Setting up a clear criteria for theinspection of directors' duties;(7) Directors liabilities being in accordance with theirpower, rights and duties.In the first chapter, the author gives a brief introduction of the corporategovernance system of Directorate Centralism, how it has developed in westerncountries, the reason why China's listed companies should change from theshareholder centralism to the directorate centralism.In the second chapter, the author analyzes from a historical and jurisprudenceperspective, the formation of shareholder centralism in China's listed companies;explains the conflicts of concepts with the corporate governance system amongscholars and related governmental authorities;analyzes the relationship betweencompanies legal property rights and shareholders' shareholding rights, protection ofstate-owned assets and protection of assets of company, shareholders' democracy andcompany operation's efficiency.In the third chapter, the author discusses the necessity and practicability of theimplementation of director centralism in China's listed companies;recommends thatwe should follow the trend of the world economy and requirements of the capitalmarket, and change from the formalistic shareholder centralism to the realisticDirectorate Centralism.In the fourth chapter, the author puts forward the theoretical and practicalfoundation for the establishment of the Directorate Centralism system in China'slisted companies;recommends clarifying the legal status of the board of directors inChina's company law, the boundary of power between the shareholders and directors,invest the board with material business decision-making power and have the boardexercises its decision-making power independently.In the fifth chapter, the author discusses how to build the board under theDirectorate Centralism system, including adopting mandatory qualificationrequirements for the directors, mandatory ratio for how many board members oneshareholder may nominate, giving more voting rights to the non-controllingshareholders to let them choose directors, increasing the number of the independentdirectors.In the sixth chapter, the author discusses the relevant legal system reform toaccommodate the Directorate Centralism with China's listed companies, whichincludes the reform of the board's executive committee, board meeting, boarddecision-making procedure, authorized representative and incentive mechanism.In the seventh chapter, the author discusses how to protect and let directorsexercise their power independently. Recommendations are adopting reasonablecriteria to evaluate directors' performance, reasonably restricting their liabilities andalleviating the pressure caused by shareholders' litigation.In the eighth chapter, the author discusses how to supervise directors under theDirectorate Centralism system, including the fully performance of the supervisoryfunction by the shareholders, the Supervisory Committee of the company andgovernment authorities.In the ninth chapter, the author discusses the evaluation and inspection criteriafor directors' activities, issues including their conflicts of interests, related partytransactions, remuneration of the directors, directors' duty of care under the mergerand acquisitions.In the tenth chapter, the author discusses directors' liability issue under theDirectorate Centralism system, which includes the legal basis for directors' liabilities,the principle of their liability assumption, detailed classification and summarization oftheir liabilities.