Effective monitoring structure within a company is one major concern of corporate govern-ance. Both China and Germany adopt a two-tier board structure and have experienced similar considerable difficulties regarding the efficacy of the supervisory boards. This paper focuses on the different ways in which both countries addressed this problem. It is argued that there has been no need for China to adopt a parallel system of independent directors. Rather, China should have followed the German way and professionalized its supervisory boards.
Table of Contents
I. Introduction
II. Internal governance structure of companies
1. Germany
2. China
III. Supervisory concerns and reforms
1. Germany
2. China
IV. Comparison and assessment
1. The notion of independent director
2. The role of the supervisory board
3. The role of the management board
4. The role of the shareholders
5. The role of the state
6. Cultural obstacles
V. Conclusion
Objectives and Research Themes
This paper examines the evolution of internal corporate governance monitoring structures in China and Germany. The primary research objective is to compare how both jurisdictions have addressed systemic failures in supervisory efficacy and to evaluate the appropriateness of China’s adoption of the Anglo-American "independent director" model in contrast to the German focus on professionalizing the supervisory board.
- Comparison of two-tier board systems in China and Germany.
- Analysis of reforms concerning supervisory and management boards.
- Evaluation of independent director effectiveness within the Chinese legal context.
- The role of shareholder rights and state influence in corporate oversight.
- Impact of cultural factors, such as Confucian tradition, on governance practices.
Excerpt from the Book
3. The role of the management board
The implementation of independent directors on the management board was aimed to counteract the insider control issue and the majority/minority conflict. Hence, the classical concept of independent di-rector had to be adjusted. The question is whether the law provides independent directors with the necessary powers within the management board and whether they can live up to expectations in practice.
Since the management board of Chinese companies is not regarded as an important organ by the law, it is legitimate to ask why the solution to two sever problems has been sought on this level? The answer is that, although weak on the books, in reality the management board plays a very important role in managing the daily business. Looking this way the management board seems to be the right toehold.
One major structural concern is, however, that the obligations of independent directors will largely overlap with the responsibilities of the supervisory board and the so-called free-rider phenomenon may arise. Some commentators suggest that under the new law the supervisory duties are roughly split into ex-ante (independent directors) and ex-post (supervisory board). This is doubtful as the supervisory board is now assigned an advisory role as well. Others suggest that independent directors might simply function as a double check where the functions overlap.
Chapter Summaries
I. Introduction: Outlines the scope of corporate governance as a control system and introduces the comparative study of China and Germany regarding their two-tier board structures.
II. Internal governance structure of companies: Describes the statutory frameworks in Germany (GmbH/AG) and China (LLC/CLS), highlighting the primary organs of governance in both nations.
III. Supervisory concerns and reforms: Details the historical challenges faced by supervisory boards in both countries and the legislative amendments (e.g., KonTraG in Germany, CCL reforms in China) aimed at addressing these deficits.
IV. Comparison and assessment: Evaluates the introduction of independent directors in China against the German model, while critiquing the roles of the supervisory board, shareholders, and the state.
V. Conclusion: Synthesizes the findings, arguing that professionalizing the supervisory board is a more effective path than the disjointed adoption of independent directors in the Chinese context.
Keywords
Corporate Governance, Two-tier Board, Supervisory Board, Independent Director, China, Germany, Chinese Company Law, AktG, Minority Shareholders, Insider Control, Reform, Monitoring, Co-determination, Cultural Obstacles, State Ownership.
Frequently Asked Questions
What is the primary subject of this research essay?
The essay focuses on improving corporate governance monitoring in companies that utilize a two-tier board structure, specifically comparing the approaches taken in China and Germany.
What are the central thematic fields covered?
The study covers board composition, supervisory board efficacy, the role of independent directors, shareholder protection mechanisms, and the impact of state influence and cultural norms on governance.
What is the core research question?
The paper asks whether China's adoption of the Anglo-American institution of independent directors was a necessary or effective solution to its internal governance problems compared to the German approach of strengthening the supervisory board.
Which scientific methods were applied in this paper?
The author employs a comparative legal analysis, evaluating statutory provisions and recent legislative reforms alongside existing academic commentary and practical applications of corporate law.
What is covered in the main body of the work?
The main body examines the internal structures of German and Chinese companies, analyzes specific supervisory reforms in both countries, and assesses the functionality of independent directors in China.
Which keywords define this work?
Key terms include Corporate Governance, two-tier board, independent director, supervisory board, minority shareholder protection, and insider control.
How does the author view the effectiveness of independent directors in China?
The author suggests that the introduction of independent directors in China may be "image-driven" and prone to the same failures as previous supervisory structures, noting significant overlap in responsibilities and structural limitations.
What role does culture play in the analysis?
The author discusses how Confucian traditions, such as loyalty to a central authority, can hinder the implementation of Western-style division of powers and individualistic oversight behaviors in Chinese corporate environments.
- Citar trabajo
- Dr. Alexander Shchavelev (Autor), 2012, Improving Corporate Governance in Companies with a Dual Board Structure, Múnich, GRIN Verlag, https://www.grin.com/document/262676
