Analysis of the functions of supervisory board system in modern Chinese companies

Abstract

Purpose

The supervisory system of modern Chinese companies has basically adopted the supervisory board system of countries of continental law system. Certain disadvantages, however, exist in the system and the purpose of this paper is to identify those disadvantages and suggest changes.

Design/methodology/approach

This paper draws upon a consideration of the policy objectives and assesses the practical gaps in implementation through a consideration of case‐studies.

Findings

There are many functions and manifest functions of the supervisory board system of modern Chinese companies. Certain disadvantages, however, exist in this system: the postmortem nature of supervision causes the failure of timely supervision, and the externality of supervision leads to information asymmetry. Meanwhile, the functions of supervisory board are weakened by the fact that the law does not impose positive qualification requirements for supervisors and that the law has not laid down specific regulations for the effective deliverance of the company's financial and business information to the supervisors and the supervisory board. In order to guarantee the realization of the functions of the company's supervisory board, we should perfect in legislation the supervisory board system of our country, and at the same time strengthen the construction of company supervisory board system in our country and other relevant supervisory mechanism and supporting systems. Originality/value – This paper presents an analysis of “gaps” in policy implementation and might influence reform in this area.

Citation

Tian, X. (2009), "Analysis of the functions of supervisory board system in modern Chinese companies", International Journal of Law and Management, Vol. 51 No. 3, pp. 153-168. https://doi.org/10.1108/17542430910959236