On The Centralism Of The Board Of Directors

Board of directors plays an essential part in company governance. Chinesecompany law should establish such a governance which puts the board of directors asthe center. I suggest to modify the company law and related laws and regulations toreposition the status of the shareholders’ committee and the board of directors, andchange the way that lists the functions and powers.In this paper, firstly the theoretical basis of the board of directors system isanalyzed. Improvement of the system needs the support of theory. We can establish aperfect system with a better understanding of the premise. Entrust-agent theory, thetheory of separation of powers and interests of stakeholder lays the foundation toimprove the system of the board of directors of the company. Secondly, it reveals thechange of the board of directors’ status in corporate governance from the perspectiveof historical. As the ownership and management rights separates, the centre ofcorporate governance goes from the shareholders to the board of directors. But now,the responsibility and status of the board of director is not clear, the supervision is notperfect, so it highlights the necessity of the legal norms of corporate governancestructure. Thirdly, this paper shows the core status of the board of directors from theaspects of its functions and reviews the status of the board of directors in the companylegislation and practice.Seeing shareholders as the center of the legislation, beingcontrolled by the big shareholder or managers reveals the weakness of the system. Itis also a call letter to check our legislation. Finally, this paper puts forward thesuggestions on the perfection of governance structure of the board of directors and onthe establishment of equilibrium relationship in the shareholders’ interests, thecompany’s interests and stakeholders’ interests. To prevent the board of directorsmisusing its power and damaging interests of shareholders and the company, aneffective incentive and constraint mechanism is also needed.