A Research On Stakeholder's Participation In Corporate Governance System

On October 27, 2005, the reversion of company law was adopted at the Eighteenth Session of the 10th NPC. The new company law has been taking effect since January 1, 2006. The fifth article of the new company prescribes that In conducting its business, a company must abide by the law, observe social and industry ethics, be honest, subject itself to supervision by the government and the public, and shoulder social responsibility. The social responsibility of a company refers the fact that a company shall be liable for relevant interest groups or public interest besides stockholders, including employee, suppliers, customers, creditors, community, environment, tax benefit represented by the government, etc. This thesis mainly discusses the theoretical basis of stakeholder, the definition of stakeholder, the validity of stakeholder's interest and the value of stakeholder's participation into the Corporate governance, in the meantime, using relative legal provisions in foreign countries as a reference, analyzes the design of the new company law of China concerning the protection of stakeholder, finally, mainly from the standpoint of stakeholder participating in Corporate governance, discusses how to perfect rules concerning stakeholder protection in company law of China. The author of this thesis believes that the Corporate governance mode of China shall be reformed and a mode with relevant stakeholders'participation shall be established, shall entitle representatives of employee and creditor with access to directorate and board of supervisors, removing the legal impediment of stakeholder's participation in Corporate governance, and perfecting the legal channels of stakeholder's participation in Corporate governance. This thesis is divided into 4 parts in structure.In the part-1, this thesis discusses the theoretical basis of corporate governance. At first, it discusses the occurrence and development of stakeholder theory which can be traced back to Berle, Means, Dodd and others. However, the definition of stakeholder was first put forward by America Stanford Research Institute in 1963. In the 1980s, with the merger wave and widespread concerning of stakeholder theory owing to the emphasis of company's social responsibility, the traditional idea that shareholders is supreme has been increasingly challenged, stakeholder theory starts to emerge into people's version. Secondly, it discusses the definition of stakeholder. The definition of stakeholder is the answer to question that who is the stakeholder of a company, which is the first question of stakeholder theory. Presently, opinions about stakeholder are widely divided, which can be classified into 3 categories. The definition given by Stanford Research Institute is: as to a company, there exits such interest groups whose support has a great influence on the survival of the company. Freeman in America defines stakeholder in Operating Strategy as this: person who have influence on the achievement of goals of a organization or who might be influenced during the goal achieving process of a organization. American economist Blare further defines stakeholder as: all the person or groups who dedicate special asset to a company, as well as who has been in a risk investment state as a result. Then, it discusses the validity of stakeholder's interest and the value of stakeholder's participation into the corporate governance. Based on the following reasons, modern corporate governance theory advocates that a company belongs not only to shareholders but also to stakeholders: first of all, the existence and development of a company does not just depend on material resource. Secondly, the liability of a shareholder is limited, whose risk being declining. Thirdly, the investment of other relevant interest groups besides shareholders to a company is the same as equity portfolio, being in the management risk of the company, so the stakeholder of a company takes partial residual risk. Finally, human capital is an important resource for the value added of a company. Human capital, like shareholders, invests in the company and takes risks related to effectiveness of operation. Once various stakeholders participate in corporate governance, the dilemma faced by operators will be facilitated. Taking stakeholders into the internal governance of a company can make the operation goals more suitable to the mass expectation, and can urge the company to fulfill its social responsibilities. And a company, which accept public ideas and shoulder its social responsibilities, will set a good image of itself, and the social benefit will turn into economic benefit on some condition.In the part-2, this thesis discusses the legislations related to stakeholder protection in other countries, mainly concerning regulations in principle. Employee interest protection is divided into employee stock ownership (including the stock option) and employee's participation in the company management (worker's director and supervisor). Creditor interest protection is divided into creditor's supervision of the company and right of claim. The company law legislations of the above-mentioned together with bondholder meeting in America, Germany and Japan are discussed in this part in order to set a reference for legislation and modification of company law in China. The fourth section discusses the assimilation phenomenon of company laws of various countries concerning stakeholder's participation in corporate governance.In the part-3, this thesis the design of company law in China to protect stakeholders. Firstly, it discusses regulations in principle to protect stakeholders and its connection to other laws. Company law shall coordinate with relevant substantive laws protecting related interest groups, thus can further regulate the company conduct, and protect the stakeholders and public interest while maximizing the interest of the company and shareholders. Secondly, it discusses the design of the new company law to protect employee interest. According to the new company law, the main approaches for employee to participate in company operation and management include the union; employee representative meeting and employee representative becomes a member of company organs. Thirdly, it discusses the design of the new company law to protect creditor, which includes protection of creditor interest in the establishing stage of the company, that in the existence stage and liquidation stage.In the part-4, this thesis discusses suggestions to perfect the system for stakeholders to participate in corporate governance in China. Firstly, the suggestion to perfect the system for stakeholders to participate in corporate governance, including developing regulations related to worker's director and employee supervisor: 1. expanding the applicable scope of worker's director, clearing the proportion of employee representatives in the board of directors and the board of supervisors, securing the place of worker's director and employee supervisor; 2. perfecting employee stock ownership plan; 3. perfecting the stock option system. Secondly, it discusses the suggestion to perfect the system for creditors to participate in corporate governance: 1. perfecting the supervision and the right of claim of creditors to company; 2. the design that bank becomes a member of the board of directors and the board of supervisors.