Social Sciences in China (Chinese Edition)

No.8, 2015

 

The Legal Regulation of Irrational Elements in the Operations of Boards of Directors

(Abstract)

 

Zhu Yikun

 

The operating processes of boards of directors are delicate and complex, and corporate legislation cannot simply equate law on board structure with law on board governance. It is necessary to start from the Chinese situation and grasp the operating processes of Chinese boards with a sober appreciation of the irrational elements in their operating mechanisms. Board governance has entered a new stage of institutionalization, and the law should shift from its emphasis on structure to give equal attention to structure and process in optimizing institutional structure. In the construction of board operating mechanisms, we should treat differently “living laws” such as customs, experience and tradition, give full play to the functionality of boards’ strategic choices, and provide legal regulation of irrational elements, so as to distinguish between different roles, develop consensus, select strong points and improve efficiency. We should build control over board operational procedures, improve the system of functional allocation, correct assessment mechanisms, develop a mechanism for judicial scrutiny of society’s emotional relationships and curb such behavioral tendencies as relational identity, structural bias and group polarization, with a view to controlling such “living laws” within the framework of the basic values and principles of board governance.