Company equity structure and governance mechanisms

Author: Yan Wu
Publisher:
Publish Date: 2004-12-01
Features: Taking the United States as an example, the economy was in a period of stagflation during the 1970s and 1980s. Although corporate performance grew slowly, senior executives, especially CEOs, still received astonishingly high compensation. A 1991 salary survey report on the top 365 public companies published by U.S. Business Week revealed that in 1990, the average annual salary of CEOs of the surveyed U.S. companies reached $1.2 million. Including stock options and other long-term compensation plans, the average total compensation was $1.95 million. The average salary increased by 212% in the 1980s, which was four times the wage growth rate of workers during the same period and three times the wage growth rate of engineers. This book attempts to innovate in the following aspects: First, it theoretically demonstrates that the governance costs of a multi-shareholder equity balance structure can be minimized, thereby improving corporate governance efficiency. Second, it argues from both theoretical and empirical perspectives that under moderate equity concentration, constructing a balancing equity structure with multiple large shareholders sharing control power can serve as a feasible choice for improving the governance of Chinese listed companies. Third, it proposes specific operational models for establishing a multi-shareholder equity balance structure for Chinese listed companies. The research significance of this book lies in: theoretically enriching the study of the relationship between corporate equity structure and governance mechanisms, and practically providing a theoretical basis and policy options for improving and perfecting the governance of Chinese listed companies. This has important practical implications for protecting investor interests, improving the quality of corporate governance for listed companies, and promoting the healthy development of the securities market.
Research on corporate governance issues emerged in Western countries in the 1970s and 1980s. Although Berle and Means had already proposed the view that the separation of ownership and control in corporations could harm shareholder interests as early as 1932 through empirical research on 200 large American companies, for a considerable period thereafter, due to the generally sound operation of companies in the U.S. and other Western countries, shareholders received reasonable returns, and people paid little attention to or conducted extensive research on the corporate governance issues implied by the "separation of ownership and control."