The Corporate Governance And Strategy Study Of Zhongye Changtian International Engineering Co., Ltd

The former basis of Zhongye Changtian International Engineering Co., Ltd (Hereunder as ‘CIE’) was a National comprehensive Design&Research Institute, whichunder the administration of China Ministry of Metallurgical. In the beginning of the2000s, according to the requirement of National Ministries, the Design&ResearchInstitute was reformed and restructured into3Companies: the Business Operatingassets were reformed and established as the CIE; the logistical assets were reformedand established as Changyuan Logistical Management Co., Ltd; the rest assets werereformed and established as Changsha Metallurgical Design and Research InstituteCo., Ltd, which is an National solely owned company. From the legal principals, thethree Companies are completely independent Legal Entities, with independentaccounting and responsibility for their own profits and losses. However, due to theundergoing changes of the External Policies, after years of actual operation, theoriginally planned restructure of the three Companies can not be totally achieved. Theup-to-date status is, after years of operating, there are great contrasts between the threecompanies: one with profit but the others with losses. The senior authorities, withconsideration for social stability, required appropriate remedy from the profited to theothers. In the end, from the legally principal, the three companies can not achieve thecompletely independent operation--there are significant contradictions in the structureof operations. Meanwhile, there are also some significant defects in the governancestructure of the above mentioned Three Companies.This paper, firstly, systematically summarized the Corporate’s governance theory.Corporate governance refers to a series of institutional arrangements and structurerelationship network contacting enterprises’ each stakeholder, It includes governancestructure and the market mechanism of management, belonging to the basic systemlevel. In the basic theory system, the most classical significance is "the Theory ofSeparation of Two Rights","Principal-agent Theory","the Stakeholder Theory". Intheory the primary purpose of corporate governance is to reduce the agency costsconsisting of Incentive Cost+monitoring cost+compulsory cost+the property lostbrought by the agent against the principal’s will. The main issue of Corporategovernance is to solve the problem about the enterprise’s restriction and enterpriseperformance and to properly select the enterprise’s scope, technology, process, structure and directors and managers.This paper simply reviewed the restructure and reform process of the abovementioned company. The restructure and reform process from Design&ResearchInstitute MCC into3Companies was legally conducted with basically completeCorporate governance mechanism.This paper investigated relevant Company’s governance status, analyzed theexisting problems of the company’s governance. Some defects may still exist aftercompany’s governance was restructured and reformed, which are mainly reflected incompany ownership structure, company governance structure and the Incentive&Restraint Mechanism.This paper optimized the existing company’s structure and its managementstrategy, combined actual national conditions, proposed a plan for establishingZhongye Changtian Holding Group, readjusted the ownership structure, governancestructure and the Incentive&Restraint Mechanism.This paper proposed assurance measures for the risk in governance optimizingscheme. To realize the optimizing scheme, this paper analyzed possible risk ingovernance optimizing process. The assurance measures for the governanceoptimizing plan was also been proposed.The study mainly focus on the trouble occurred during the restructuring of theNational Owned Enterprises. Meanwhile, this study provides practical, challengingand forward-looking meanings for the improvement and standardization of therestructured National Owned Enterprises operating system.