Contractual Analysis of Corporate Governance

Author: Chen Chiping
Publisher:
Publish Date: 2006-05-26
Features: The enterprise is an organic whole formed by the owners of different elements such as capital, labor, management, and technology, connected through contracts. The fundamental reason for the existence and development of the enterprise lies in the ability of the element owners to cooperate and create cooperative surplus. Therefore, the creation and distribution of cooperative surplus are the core issues of the enterprise. The goal of corporate governance is to promote the transformation of non-cooperative games among element owners into cooperative games, thereby enhancing the cooperative efficiency of the enterprise. Entrepreneurs are the central contracting parties in the enterprise contract, coordinators and organizers of various elements, and their primary function is to drive the creation of cooperative surplus. The cooperation between entrepreneurs and investors is a necessary condition for the creation of cooperative surplus in the enterprise, while the cooperation between entrepreneurs and laborers is the core content of cooperative surplus creation. The institutional environment guarantees the realization of cooperative efficiency in the enterprise.
The enterprise is an organic whole formed by the owners of different elements such as capital, labor, management, and technology, connected through contracts. The fundamental reason for the existence and development of the enterprise lies in the ability of the element owners to cooperate and create cooperative surplus. Therefore, the creation and distribution of cooperative surplus are the core issues of the enterprise. The goal of corporate governance is to promote the transformation of non-cooperative games among element owners into cooperative games, thereby enhancing the cooperative efficiency of the enterprise. Since the enterprise can be seen as a set of contractual relationships, corporate governance can be understood from the perspective of contractual governance. From a contractual perspective, governance mechanisms can be divided into two aspects: the governance of clearly defined contractual relationships and flexible governance. For the governance of clearly defined contractual relationships, governance efficiency lies in the effective fulfillment of contracts; for flexible governance, governance efficiency primarily depends on the reasonable allocation of residual rights. The organic combination of the two constitutes the foundation of corporate governance efficiency. Entrepreneurs are the central contracting parties in the enterprise contract, coordinators and organizers of various elements, and their primary function is to drive the creation of cooperative surplus. The cooperation between entrepreneurs and investors is a necessary condition for the creation of cooperative surplus in the enterprise, while the cooperation between entrepreneurs and laborers is the core content of cooperative surplus creation. The institutional environment guarantees the realization of cooperative efficiency in the enterprise.