The Research On The GEM Company Governance Basing On The Principal-agent Theory

Effective governance is prerequisite for the gem company in China access tohigher profits and to realize sustainable development. At present, the gem companygovernance mechanisms and standardization operations exposed many problems, suchas insider control, supervision and incentive mechanism are incomplete, Lack ofequity incentive and so on. These problems have already hindered the gem companyto improve the profit and add to competitive advantage.Therefore,it is particularlyimportant and urgent to solve the corporate governance problems effectively and tooptimize and improve the governance structure.there is much corporate governance theory, especially the principal-agent theorygets the domestic and international scholars’ concern and attention. it Based on theresearch on corporate governance and principal-agent literature review and on theanalysis of the gem company corporate governance issues, thinking that the equitystructure is not reasonable proxy mechanism, lack of independent director andsupervisory board function and weakening of internal governance efficiency is low,the lack of external management of stakeholder governance deficiencies are the rootcauses of the gem corporate governance issues in our country. Through to our countrythe gem principal-agent analysis of corporate governance issues, finding that the basictask of the corporate governance is to coordinate the relationship and interests of them,and gets the benefit maximization of them.This article constructs the gem company governance principal-agent completeinformation static game model, through principals and agents the optimal strategychoice,finding out the mixed Nash equilibrium of the game. This article througheconomic analysis finding the mixed Nash equilibrium,to point out the factors, whichcan make some influences on the gem company governance structure. The conclusionincludes four points: The first is to build the gem company principal-agent economiccontract relationship, further clarify the rights and obligations of the parties,torealize the effective control for the control power, minimize regulatory costs, playregulatory functions of the external market; The second is to expand the rights of theagent, minimize the effort cost of the agent; The third is to strengthen the range andstrength of the agent incentive measures, such as improve the agent’s basic salary andcompensation, while give the agent appropriate risk income.The fourth is to improveviolation fines (not due diligence), which resulted in the reduction probability. Itbased on principal-agent game analysis, further proposed the gem company’s internaland external governance countermeasure and suggestion. The first is to optimizeequity structure, enhance the scientific decision-making; The second is to enhance thecreativity of board governance; The third is to improve the supervision authority ofmanagement board; The fourth is to improve and expand the manager market; The fifth is to enhance the co-governance level of the stakeholders; The sixth is toestablish legal system and regulatory mechanisms.