According to the research report of SSE Joint Research Plan "Research on Strategies for Corporate Governance Supervision after Equity Division Reform", equity division reform directly eliminates one major chronic illness in corporate governance. Other system innovations completed in the reform create unprecedented and excellent condition for supervision of corporate governance. However, since other old problems in corporate governance have not been fundamentally solved and may pop out in new environment, corporate governance supervision, facing new problems standing out after equity division reform, still shoulders heavy responsibilities.
According to the report, firstly, supervision of corporate governance faces selective information disclosure after equity division reform. In a long period, ownership right and management right of listed companies are closely connected with each other. It is popular that controlling shareholders directly manage listed companies. Therefore, the controlling shareholders, other shareholders who assign directors and the senior management naturally enjoy more advantages in information than public shareholders. If the directorate cannot treat all shareholders fairly, selective information disclosure may prevail. Meanwhile, the selective information disclosure can also occur in the on-the-spot investigation by researchers of institutional investors, in interviews and reports of the media, in administrative behavior of government authorities, external business activities of listed companies and external communication of directors, supervisors and senior management.
Secondly, market for corporate controlling right will be active after equity division reform. Trading of controlling right of listed companies may damage rights and interests of holders of public shares. The first is that the management and controlling shareholders adopt such anti-takeover measures as golden parachute, disposing well-performing assets and disclosing technological secrets, which may decrease and damage companies' value and harm rights and interests of public shareholders. In the fight for controlling rights, the management may take the chance to claim for profits. The second is that the two parties of controlling rights trading may reach non-public agreement at the expense of companies' interests and legal rights and interests of public shareholders. The third is that supervision over information disclosure may be more difficult in the process of controlling rights trading. Since trading of controlling rights takes place between shareholders, the directorate in charge of information disclosure is passive in obtaining relevant information in time and exactly. The misalignment and its malicious exercise by trading parties will hinder investors from obtaining complete and exact information for decision-making.
Thirdly, there will be more listed companies under "several companies controlled by one" system. Since 2000, such phenomenon has existed in the securities market: one private-owned company controlled several listed companies, which was called "X Family" by the media. The growth effects of controlling rights bring great risks to the governance of listed companies held by private companies. The failure of governance of listed companies under "several companies controlled by one" like "Delong Family" and "Green Cool Family" caused great loss in interest of investors and left profound lessons for the market. After equity division reform, the equity will be more diversified, and state-owned economies will retreat from the common competitive fields. Those two trends may cause the occurrence of more private-owned companies controlling several listed ones in the capital market.
As to new problems that may occur in corporate governance after equity division reform, the report suggests corresponding supervision measures. Firstly, we should further implement the "Two Laws", assist the court system in establishing securities litigation mechanism as soon as possible, and accelerate settling the relationship between administrative supervision, securities judicature and the market regulatory mechanism. Secondly, since state holding companies will be the main body of listed companies in China in a long period, we should promote the reform of state holding companies, regulate the governance of state holding listed companies, support and promote the injection of well-performing assets and realize the overall listing of state-owned companies. We should also increase the companies' transparency by reducing connected transactions, impel state-owned listed companies to establish the equity incentive mechanism, introduce strategic investors, improve the structure of the directorate, the board of supervisors and the management and establish the balance mechanism of corporate governance. Thirdly, we should improve and emphasize the governance and supervision of listed companies under "several companies controlled by one" system. In view of the cross-area and concealment of companies under such system, we can establish special institutes to take charge of supervision over those companies and set up shared database, so that the agencies can also master the whole situation of those companies and better identify and caution risks. The report also suggests strengthening corporate governance supervision in the process of controlling rights transfer. Besides strictly carrying out the new "Measures on Administration of Listed Companies' Acquisition", we should perform the advantages of the responsibility system for supervision in areas under respective jurisdiction and reinforce the on-the-spot supervision over trading of controlling rights.
According to the report, mighty institutional investors are of great importance to improving governance of listed companies. But the precondition is the honesty and law-abidance of institutional investors. If institutional investors can get privilege in the market, or obtain great profits through insider dealing or market manipulation, but can also escape from serious punishment, they cannot effectively exert their influence. On the contrary, they will distort the market mechanism and directly damage the rights and interests of small and medium-sized investors. We should actively improve the structure of institutional investors by developing institutional investors, especially those ones with stable and long-term capital sources, under the precondition of effective supervision.
Besides, the report suggests increasing supply of corporate governance information in capital market. It is necessary for supervision authorities to adopt measures to encourage and regulate independent rating of corporate governance, enhance the incentive and regulatory influence by the market mechanism on corporate governance, and also regulate and encourage the media's research and investigation report on corporate governance situation.
