Legal Analysis Of Corporate Governance

As a means of corporate governance independent director system was created and developed in common law countries and based on governance structure of the"single-track system". The characteristic of the"single-track system"structure is that organization structure is not set up a board of supervisors and board of director sets policy and supervises all of actions. Disadvantage of this structure is weakened oversight function, leading to widespread phenomenon of"the internal control", and making run of company face with serious crisis of confidence. In order to reverse the crisis, common law countries have started the"single-track system" model of innovation and improved system, and outside independent directors were introduced to strengthen supervision of board without changing the governance structure of the premise. After several years of development, the independent directors were in the growing in the board's position, and the system achieved very good results.China began to transform and share a modern enterprise system from the late eighties of the last century. The original organization structure of companies used"dual-track system"approach of the civil law, that set up a the board of supervisors in addition to a separate board of directors, and the board of supervisors was responsible for supervising board and senior management. But the effect of this mode of supervision is far from its mind of design, thus the introduction of independent director system is growing. August 2001,"The guidelines on the establishment of independent directors in listed companies"was published by China Securities Regulatory Commission, in which an independent director system appeared in China normative legal documents in the first time. Followed, it began to play an important role in ensuring stable operation of our company and improvement and development of the corporate governance structure. In view of this, our study on the independent director system in depth analysis is necessary and has practical significance. The purpose of this writing is to discover and solve problems in the process of system run, and to put the improvement suggestions, by the theoretical and empirical analysis on the value of the independent director system and related problems.In the first part of this paper the corporate governance and the basic situation of the independent director system were described in general. First, concept and purpose of the corporate governance were briefly introduced. With development of company, the ownership and the management began to be separate, and shareholders will no longer manage the company themselves, but through the"principal– agent"relationship to the company's management board and managers. In order to board of directors and managers were able to make faithful and diligent management, at least not damaging the company and shareholders, the system must take appropriate measures. Thus, the purpose of corporate governance has been lead, that is to take complete, appropriate control mode, coordinate utilization of company resources, and ensure the company efficient, orderly operation without weakening to the interests of the company and shareholders. Then, the status of corporate governance and future development trends are briefly introduced. Pointed out that the trend of corporate governance is from a single maximum of company's interests to balance of maximum of company's interests and its social responsibility, and that is taken as guiding ideology to discuss independent directors system. Later, with comparison of the"Outside director","Disinterested Director"and other similar concepts, the concept of independent directors were accurately defined, and it is clearly pointed that the nature of independent directors is its"independence". Meanwhile, the emergence of independent directors, the development process and development in China were described.In the second part the independent director system and its several aspects are analyzed from legal theory. For one thing, the value of the independent directors system is affirmed in the following aspects: the first is to prevent occurrence of insider control and maintain interests of companies and shareholders; the second is to improve the quality of board decisions and perfect the corporate decision-making mechanism; the third is to promote transparent management of company, safeguard the securities market and the interests of investors; the fourth is to improve the corporate governance theory of the two legal systems. For another,"the independence"of the independent directors is comprehensively defined and it is pointed out that this"independence"can not be full and absolute independence. Then, with the analysis of the functions of the independent directors and board of supervisors, and comparison of the similarities and differences between the two, it provides a basis so as to better understand the functions of independent directors.In the third part the situation of the independent director has evaluated. As a legal system rose in the Anglo-American, the independent director system has been transplanted into our country, and it has played a significant role in the corporate governance reform, but there were inevitably some disputes and problems. This chapter confirms some positive impacts the system brings, such as enhancement of the corporate governance, improvement of the market mechanism, promotion of the economic development, furthermore they have also some negative aspects of independence deficiencies and ability limitations to perform their duties in the operation course."The independence"of the independent director system is the most important features of character, and lack of independence will greatly affect the existence of the independent director system and role play. Ability to perform their duties is another important factor that ensures independent directors to involve in corporate management and supervision of company operations. Existing legal system is not perfect, and it is not able to constrain the work of independent directors for the company's services, resulting in deterioration in the quality of their work and failure of performing duties. The survey shows that the phenomenon is still prevalent in listed companies in China.In the fourth part of this paper some legal proposals and solutions have proposed. The direction of corporate governance determines the choice of development path of independent director system. In current company law shareholders were known as the center of absolute sovereignty doctrine, which is accorded with company development in early period, but this old system no longer met today's company development mode as the further development. It is imperative that relative sovereignty doctrine which makes the board of directors as center of company replaces absolute sovereignty doctrine. Meanwhile, improvement measures were proposed that focus on the conflict of independent directors and board of supervisors. Finally, some views have been proposed in improvement of the legal environment related to independent directors and the legal mechanism in appointment and removal of independent directors, and reinforcement of the legal mechanisms for the distribution of benefits, and establishment and improvement of the responsibility of independent directors, and a reasonable prospect is made for the future development of corporate governance.