Remodeling Of Corporate Governance Structure Under The Theory Of Separation Of Powers With Check And Balance

Separation of powers with checks and balance is not confined to power separation. Separation of powers includes three elements:personnel independence, department separation and power separation. Furthermore, checks and balance shall be carried out with further interactive intervene mechanism on the basis of separation of powers. The theoretical studies and legislation on corporate law are just restricted to power separation, without further discussing the issues of personnel independence and department separation. This thesis finds that central power will be expanded by the power separation without checks and balance according to the practice of separation of powers with checks and balance in US and UK. It further proves the necessity for conducting checks and balance to power centre in the perspective of corporate law reform to changes of corporate power centre. In China, the power centre of corporate is to control a series of departments under the personnel control chain of shareholders. In the theory of separation of powers with checks and balance, personnel control is called "mixed personnel multi-roles", which can effectively reduce friction and promote the efficiency so as to restrain agency cost. However,"mixed personnel multi-roles" is apt to over-centralized power and illegal activities. The involvement of non-interested party will help reduce the side effect of "mixed personnel multi-roles". Yet, the involvement of more than half of independent directors in board of directors to create non-interested party is not desirable. The side effect of imposing restrictions of shareholders'vote power is inestimable as well. Thus, other approaches to contain mixed personnel multi-roles can be used, such as interactive intervene. It is a basic model for checks and balance, referring to the equal power of each department to intervene others in order to realize the power balance. Moreover, the interactive intervene shall be conducted under the equal separation of personnel, departments and power (Separation of power may not require checks and balance, but power separation is necessary to checks and balance). For the corporate governance structure in China, board of supervisors works as the carrier for independent supervisor ship via reforms. Checks and balance eventually will be conducted under the independent supervision ship and power of operation in the control chain. For independent directors, the establishment of boards of nomination, payment and audit will restrict the control chain of most non-interested party in some local way.