The lunar year of the tiger is approaching, which is the time to count the annual income and re-examine the investment strategy. Looking back on the past year, the supervision and punishment under the registration system have been strengthened, the popularity of ESG investment concept in the market has been improved, the suffering of “black swan” has been enough, and long-term ism has become more prevalent.
The core difference between investment and speculation lies in rational return, and the basis of comprehensive judgment of risk is to measure the performance of corporate governance. There have been many details about the relationship between corporate governance and investment income in academia and industry. Its direction is clear, clear and transparent corporate governance with sound mechanism is beneficial in resisting risks.
Looking at the A-share market, the governance loopholes of listed companies have long been the most concentrated risk exposure. In the A-share market in 2021, the infighting among the company’s shareholders continued for several years and intensified, the separation of the company’s husband and wife was involved in the change of control, the company was involved in the “tax evasion storm” of unscrupulous artists, the board of directors changed blood, and the actual controller of the company was exposed to be an underworld and sentenced to life imprisonment
the daily economic news specially reviewed dozens of A-share corporate governance cases that occurred or made progress in 2021, selected the ten most representative cases, and invited Professor Gao Minghua, director of the Research Center for corporate governance and enterprise development of Beijing Normal University, to comment. we try to summarize the symptoms of corporate governance loopholes, track the ambush and outbreak of risks, and provide a reference “negative list” for investment strategies in the new year.
No.10 Tianjin Guifaxiang 18Th Street Mahua Food Co.Ltd(002820) : “domestic thieves” misappropriated tens of millions of yuan, and the new chairman took the lead in recovering the stolen goods
The newly appointed chairman took the lead in “recovering stolen goods”. This seemingly absurd thing happened to the “Mahua first stock” Tianjin Guifaxiang 18Th Street Mahua Food Co.Ltd(002820) (002820, SZ). The listed company operates the time-honored specialty Mahua on 18th Street, and the actual controller is the SASAC of Hexi District People’s Government of Tianjin.
In November 2021, Tianjin Guifaxiang 18Th Street Mahua Food Co.Ltd(002820) disclosed that it was found that a cashier of a wholly-owned subsidiary illegally misappropriated the funds of the logistics company for private use by taking advantage of his position. He was suspected of violating the law and committing a crime. The chairman of the company who took office shortly took the lead in setting up a working group to recover the funds.
At present, the case is still under investigation. In December 2021, Tianjin Guifaxiang 18Th Street Mahua Food Co.Ltd(002820) disclosed that the misappropriation of funds involved 10.4314 million yuan, spanning four years, and the impact on the net profit in 2021 was about 7.3303 million yuan. The net profit attributable to the parent company in the first three quarters of Tianjin Guifaxiang 18Th Street Mahua Food Co.Ltd(002820) 2021 was 28.7864 million yuan.
In 2018, the company’s internal control personnel embezzled more than {13 million of the company’s {self accounting shares, but there was no such case of embezzlement of {13 million of the company’s internal control personnel.
Tianjin Guifaxiang 18Th Street Mahua Food Co.Ltd(002820) has stated that while actively pursuing the payment, it has organized the investigation and rectification of the safety of funds and the effectiveness of the implementation of relevant internal control systems. Recently, the new internal control system has been disclosed.
comments by Professor Gao Minghua:
This case reflects the imperfection of the company’s internal control system and internal and external supervision system.
Although relevant regulators have also issued internal control rules in different periods, there are many loopholes, and most of the internal control systems of enterprises have many weak links.
The corresponding internal and external supervision is not in place. Even if the supervision finds problems, the punishment to the main person in charge of the enterprise is also very light, so that the person in charge of the enterprise has no motivation to establish a perfect internal control system. Once problems are found, it is “too late to mend”.
No.9 Dalian Sunasia Tourism Holding Co.Ltd(600593) : the dispute between shareholders is still unresolved, and the increase in income from selling penguins leads to friction with the regulator
From the competition for the control right of the board of directors to the competition for the management right of the company, and then to the fact that the company’s share price has been greatly reduced due to its unqualified performance, Dalian Sunasia Tourism Holding Co.Ltd(600593) (600593, SH) has made a negative operation demonstration for A-Shares in the past two years.
As a “barbarian”, Panjing fund came to power in 2020 after dormant for many years. In the summer of 2020, the battle between Panjing fund and the former management for the control of the board of directors was intense, and an ambulance was attracted due to physical conflict. Since then, Panjing fund has “changed blood” at the management level, and its relationship with many shareholders of listed companies has become rigid and difficult to solve.
Shareholders who indulge in the change of control are difficult to take the overall situation into account at the operational level. Under the epidemic situation, the main business of the aquarium, which aims to build a “blue Disney”, fell into domestic and foreign difficulties and Dalian Sunasia Tourism Holding Co.Ltd(600593) performance was urgent. At the beginning of 2021, the company was widely questioned because of its sudden sale of penguin Chong performance at the end of 2020. There was fierce friction with the regulators and was finally not recognized. The company was still wearing stars and hats.
Dalian Shengya headquarters, a conflict attracted many onlookers
Photo source: photographed by reporter Li shaoting (information picture)
Today, the equity dispute of Dalian Sunasia Tourism Holding Co.Ltd(600593) continues. In December 2021, the company also reported that the projects carried out by the former management were illegal. In addition, Mao Wei, the director and general manager of the company, received the decision on administrative punishment, which showed that Mao Wei controlled and used 55 securities accounts including “Yang Mouping” (Note: the current chairman of the company is named Yang Ziping, who took office after the change of control) to trade the company’s shares. The supervisor believes that the current actual controller of the company is not clear, and requires to explain the identification of the actual controller.
In terms of share price performance, the share price of Dalian Sunasia Tourism Holding Co.Ltd(600593) once rose in the first six months of the openness of the competition for control. However, by the end of 2020, the performance dilemma began to emerge and the competition for control was mired again. Since then, the share price of the company has declined for thousands of miles and has not improved so far.
comments by Professor Gao Minghua:
The competition for control among shareholders is a common phenomenon in the capital market, even a common phenomenon, which reflects the deep-rooted concept of “control” in enterprises. For the perfect capital market and modern enterprises, the ownership of shareholders and the control of enterprises are separated, that is, the capital owners who have capital but lack the ability to operate hand over the control to the professional managers who have the ability to operate, while the capital owners mainly act as supervisors, And the approvers or makers of important strategic decisions (the development trend is that the board of directors is more and more inclined to supervisors and approvers of strategic decisions, the decision-makers are handed over to professional managers who are more familiar with the market and enterprises, and the chairman is only the convener of the board of directors), which is a scientific division of labor in the modern enterprise system.
If the capital owner also has strong business ability, the one with the strongest ability shall be selected. At present, the widespread competition for control rights among shareholders destroys this division of labor, and the final result is the decline or even collapse of enterprise operating performance, causing significant damage to all capital owners and other stakeholders.
No.8 Leysen Jewelry Inc(603900) : husband and wife divorce raises the battle for control, and the chairman of “Star” is out
Housework is originally a private matter, but in the capital market, it is difficult to distinguish between public and private, because housework often affects the normal operation of the company. Well known cases needless to say, Dangdang’s Yu Yu and Li Guoqing are typical.
In the early years, some enterprises were jointly started by husband and wife, and after listing, they were controlled by the family. Divorce inevitably involves the division of property. The rough handling will lead to internal strife and even the change of control of the company. In 2021, the competition for control of “the first share of Shanghai jewelry IPO” Leysen Jewelry Inc(603900) (603900, SH) once again confirmed this point.
In December 2021, Leysen Jewelry Inc(603900) former chairman Shen Dongjun and his wife Ma Qiao were sentenced in the second instance, ending the two-year divorce dispute. After public reporting and confrontation across the air, on January 10 this year, at the shareholders’ meeting of Leysen Jewelry Inc(603900) , the Ma family on the wife’s side won and regained the right to speak in the board of directors, while Shen Dongjun, the former chairman of the company’s listing and “Diamond merchant”, was out and retained only one director. The shock caused by the divorce case was suspended.
Leysen Jewelry Inc(603900) at the shareholders’ meeting, Shen Dongjun only retained the position of director
Photo source: photographed by reporter Huang Xinlei (data picture)
Shen Dongjun is the founder of Leysen Jewelry Inc(603900) . The role of “Shen Dongjun” in the TV series “Clara lovers” starring Tang Yan is inspired by him. Shen Dongjun himself has also appeared in many film and television dramas, including this play.
As a jewelry brand, the image of Leysen Jewelry Inc(603900) has been clouded by the divorce. As far as the development of the company is concerned, the struggle for control has led to personnel unrest, which may inevitably have an impact on the strategic direction and business strategy. After the departure of Founder Shen Dongjun, it remains to be seen how effective the Markov family will take over the business.
comments by Professor Gao Minghua:
Similar to the previous case, if the control power is handed over to professional managers to realize the marketization of operation control power, and family members only act as supervisors and participants in major decisions, the arbitrary decisions of family members can be weakened, the interference of internal contradictions of family members to the enterprise can be avoided, and the risk of enterprise segmentation can be effectively prevented, It can also solve the problem of the lack of competent people in the family who can control the operation.
Since the operation control is in the hands of professional managers, whether the shares held by family members are changed within the family or sold to others outside the family, they will not affect the basic stability of operation control, so as to realize the sustainable development of the enterprise. Of course, if there are generally recognized talents with strong business ability in the family, they can also be regarded as professional managers on the premise of clarifying the boundary of rights.
No.7 Beijing Jingxi Culture&Tourism Co.Ltd(000802) : the former vice chairman was punished and banned from the market, and the board of directors was re elected with their own concerns
The violation of laws and regulations by listed companies can be described as “self sin can not live”.
“War wolf 2”, “I’m not a god of medicine”, “wandering the earth”… From tourism to film Beijing Jingxi Culture&Tourism Co.Ltd(000802) (000802, SZ) once became a “popular harvester” and a “dark horse” in the stock market.
However, since 2020, Lou Xiaoxi, the former vice chairman, reported the job-related crimes of song Ge, the chairman, in his real name, and the “big bath” of Beijing Jingxi Culture&Tourism Co.Ltd(000802) performance has attracted doubts from the outside world. Since 2021, the ghost of a beautiful woman starring Zheng Shuang has been involved in the storm of “Yin-Yang contract”, and the infighting on the board of directors has also intensified the scandal.
After a protracted struggle, song Ge and Lou Xiaoxi have been out of the board of directors. In 2021, Lou Xiaoxi, former vice chairman of Beijing Jingxi Culture&Tourism Co.Ltd(000802) was punished by Beijing Securities Regulatory Bureau for banning market entry. After being punished, the company was criticized by Shenzhen Stock Exchange.
Beijing Culture held a shareholders’ meeting last June
Photo source: every reporter can take photos by Yang (information picture)
In October 2021, the camp composed of the first and second largest shareholders of Beijing Jingxi Culture&Tourism Co.Ltd(000802) hoped to re-elect the board of directors, while the original board of directors proposed more candidates representing their own forces to join the board. Finally, the wishes of the first and second largest shareholders failed.
At present, Beijing Jingxi Culture&Tourism Co.Ltd(000802) claims to have no actual controller. As the main investor and main controller of the “gods Trilogy”, the company’s performance is almost all based on this, but there is no news of the release of the series of films at present.
comments by Professor Gao Minghua:
There is no doubt that the board of directors represents the interests of all shareholders, but because of this, shareholders want to send their own representatives to the board of directors. But the problem is that the size of the board of directors is limited, often only a dozen people, which leads to that only the representatives of major shareholders can enter the board of directors, and the number of Representatives depends on the proportion of shares.
In order to ensure their rights and interests, the competition between major shareholders for the number of seats on the board of directors and the position of chairman of the board of directors has become increasingly fierce, resulting in frequent unrest in the company and affecting the interests of all shareholders.
In order to solve the problem, the trend of international development is that all shareholders do not send representatives, but the board of directors is composed of independent directors and CEO (CEO is not a shareholder, or although he is a shareholder, he only has options and has no voting rights of ordinary shareholders). The chairman is also served by independent directors, which avoids the turbulence of the board of directors. Of course, the board of directors is composed of independent directors, which need to come from a transparent, competitive and professional manager market.
No.6 Shanghai Kehua Bio-Engineering Co.Ltd(002022) : the core subsidiary is in a crisis of out of control and the audit work is blocked
Mergers and acquisitions are difficult, integration may be more difficult, and subordinate companies get out of control from time to time. To make the effect of 1 + 1 > 2 continue to release, it is a test of the ability of corporate governance.
In December 2021, Shanghai Kehua Bio-Engineering Co.Ltd(002022) (002022, SZ), whose performance soared due to covid-19 test kit business, disclosed that in the face of the company’s request to cooperate with the annual audit accountant for relevant audit, the two holding subsidiaries of the company, Xi’an Tianlong Technology Co., Ltd. and Suzhou Tianlong Biotechnology Co., Ltd. (hereinafter collectively referred to as Tianlong company), said they could not cooperate. In this regard, listed companies expressed “the strongest indignation and condemnation”.
From the perspective of performance volume, Tianlong company occupies a core position in the listed company system, and behind this audit dispute is the continuation of the dispute between Shanghai Kehua Bio-Engineering Co.Ltd(002022) and minority shareholders. The two sides have different opinions on the “further investment” clause under the investment agreement signed before M & A.
In 2018, Shanghai Kehua Bio-Engineering Co.Ltd(002022) obtained 62% equity of Tianlong company with RMB 554 million in cash. The focus of the dispute between the two sides is whether Shanghai Kehua Bio-Engineering Co.Ltd(002022) should acquire the remaining 38% equity of Tianlong company at the price of 10.504 billion yuan in 2021. At present, the “10 billion arbitration case” between Shanghai Kehua Bio-Engineering Co.Ltd(002022) and its subsidiaries has not been heard, and the future trend is still pending.
Such a situation is not an isolated case in a shares, and the “funeral first share” Fortune Ng Fung Food (Hebei) Co.Ltd(600965) (600965, SH) also lost control of its subsidiary in 2020. In September of that year, Fortune Ng Fung Food (Hebei) Co.Ltd(600965) reported that it was involved in a “contract fraud case”. After investigation by reporters, the operator of Shaoshan cemetery company acquired by it has been lost. In October 2021, Shaoshan Public Security Bureau filed a case of illegal absorption of public deposits by companies such as Shaoshan cemetery company, a holding subsidiary of Fortune Ng Fung Food (Hebei) Co.Ltd(600965) .
comments by Professor Gao Minghua:
The essence of corporate governance is contract and compliance, and the relationship between parent and subsidiary companies runs counter to this contract concept.
In the modern mature market economy, even in China’s legal system, the parent company and subsidiary company are two independent and equal legal subjects, and they are not subordinate. Therefore, in developed countries, the concept of parent and subsidiary company is increasingly weakened and replaced by the relationship between ordinary shareholders and enterprises.
Controlling shareholders are not controlling shareholders, and “controlling” does not mean “controlling”. Controlling shareholders are only major shareholders. In addition to major shareholders, there are other shareholders, so the rights and interests of shareholders should be equally protected.
Since we generally understand “holding” as “control”, it becomes very common for major shareholders to infringe on the interests of other shareholders.
As a listed company, the enterprise controlled by the major shareholder (still referred to as the “subsidiary company” for the time being) requires consolidated statements with the major shareholder, and the information disclosure of the “subsidiary company” also needs to be synchronized with the listed company, but this still does not mean that the major shareholder can control the “subsidiary company”, and the major shareholder cannot impose his will on the “subsidiary company”, You can only transmit your will to the “subsidiary” by sending your own agent (director). Whether you finally adopt it or not depends on other directors. It must be reiterated that they have equal legal status.
No.5 Easy Visible Supply Chain Management Co.Ltd(600093) : the former controlling shareholder occupied 4.3 billion funds and still hasn’t returned after the alarm processing
Capital occupation, illegal guarantee and other problems often occur in listed companies. This move by major shareholders and directors, supervisors and senior executives has encroached on the interests of listed companies and minority shareholders. Such acts have exposed the internal control problems of the company, and allowing vicious violations will drag the company into the abyss.
In 2021, Easy Visible Supply Chain Management Co.Ltd(600093) (600093, SH) disclosed that as of June 30, the four customers of Easy Visible Supply Chain Management Co.Ltd(600093) passed by the former controlling shareholder Jiutian holdings constituted a total capital occupation of 4.253 billion yuan for the company and its subsidiaries. Subsequently, the company reported to the public security organ that some former executives were suspected of committing crimes.
On January 19 this year, Easy Visible Supply Chain Management Co.Ltd(600093) disclosed that by the end of the third quarter of 2021, the company’s consolidated net assets were still negative, and there was a risk of financial forced delisting. The company has repeatedly sent letters to the shareholder Jiutian holdings to urge it to fulfill its commitment of capital occupation repayment. As of January 18, 2022, the company has not received any repayment.
The problem of capital occupation is very prominent in A-share listed companies. In 2021, Beijing Jetsen Technology Co.Ltd(300182) (300182, SZ) also had similar problems. The related party occupying the funds was the controlling shareholder Xu Ziquan, occupying a total of 74 million yuan, and the principal and interest were paid off at the end of November.
At present, such behavior has become a key target. In July 2021, the general office of the CPC Central Committee and the general office of the State Council issued the opinions on strictly cracking down on securities illegal activities according to law, which clearly pointed out that “for acts that seriously infringe on the interests of listed companies such as capital occupation and illegal guarantee, we should seriously investigate and recover compensation according to law and rectify them within a time limit”.
comments by Professor Gao Minghua:
Basically the same as the previous case, since “controlling” is understood as “controlling” and “controlling shareholder” is understood as “controlling shareholder”, the controlling shareholder excessively pursues “control right income” in the company it controls, including fund occupation and illegal guarantee, and obtains huge income as soon as possible through the transfer and transfer of funds or assets, Instead of obtaining normal income through the dividend right income that all shareholders can enjoy.
The former causes serious damage to its holding company and other shareholders, while the latter can promote the steady development of its holding company, but it is often ignored because the controlling shareholders obtain less short-term income. Therefore, the law should clarify the difference between “holding” and “control”, so as to prevent the controlling shareholders from losing the long-term development of the enterprise for short-term interests.
No.4 Shandong Xinchao Energy Corporation Limited(600777) : the internal struggle among shareholders has not ended for three years, and the “double headed board of directors” acts independently
Shandong Xinchao Energy Corporation Limited(600777) (600777, SH) was once advertised as the “governance sample of minority shareholders”, but there were cracks among the company’s shareholders in 2019. In 2021, the company’s “internal struggle” was completely open, clear and expanded, and the game was more intense.
In July 2021, nine shareholders initiated a shareholders’ meeting to elect a “new board of directors”, but at the same time, the “original board of directors” did not recognize it, and the two sides broke out in a frontal conflict at the office of the listed company in Beijing. The “new board of directors” believes that the company has fallen into insider control.
Press conference of “new board of directors”
Photo source: photographed by reporter Li shaoting (information picture)
At present, the shareholder dispute of Shandong Xinchao Energy Corporation Limited(600777) has not been settled. In the company’s announcement, the progress of litigation, supervision letter and administrative punishment have become the most eye-catching information.
In addition to Shandong Xinchao Energy Corporation Limited(600777) , Beijing Transtrue Technology Inc(002771) (002771, SZ) new and old controlling shareholders also had friction. The differences evolved from mutual litigation to competition for official seal and business license in 2021. The independent director said frankly that he was “very confused and didn’t know how to judge” and resigned quickly. Only recently did the company announce that the seal has returned to normal.
Shareholder disputes are not uncommon. Under the entanglement of interests, all parties are busy competing and struggling, which is difficult not to affect the governance efficiency of the company. In addition, such problems often resort to legal procedures, which often last for many years. The time cost is accompanied by the opportunity cost, which will obviously affect the development of the company.
comments by Professor Gao Minghua:
“Double headed board of directors” is related to the defects of the existing company law. According to the existing company law, shareholders who individually or jointly hold 10% of the company’s shares can propose to convene a general meeting of shareholders, which shall be convened by the board of directors. If the board of directors does not convene, shareholders who individually or jointly hold up to 10% of the company’s shares may convene the meeting by themselves.
In general, if the proposal proposed by the qualified shareholders who propose to convene the general meeting of shareholders is inconsistent with the interests of the existing board of directors, the existing board of directors will not convene the meeting. For example, if the shareholders who propose to convene the general meeting of shareholders are dissatisfied with the existing board of directors and ask for re-election of the board of directors, the existing board of directors will usually ignore it. At this time, if the shareholders who propose to convene the general meeting of shareholders themselves and elect a new board of directors, there will be a “double headed board of directors”.
The reason for this phenomenon is that when qualified shareholders propose to convene a general meeting of shareholders, but the existing board of directors ignores it and can only convene a general meeting of shareholders and elect a new board of directors, the existing company law does not stipulate which board of directors is legal, In other words, there is no provision on whether the original board of directors will be automatically dismissed when the new board of directors is formed (because the original board of directors did not respond to the legal initiative of qualified shareholders to convene the general meeting of shareholders).
The existence of “double headed board of directors” will undoubtedly confuse the company’s decision-making and management, and eventually damage the interests of all shareholders.
No.3 Seazen Holdings Co.Ltd(601155) : the second instance judgment of the former chairman’s case of molesting a young girl, entrepreneurs must pay attention to compliance and moral cultivation
In May 2021, the second intermediate people’s Court of Shanghai held a closed court hearing and pronounced a judgment in court on the case of the defendant Wang Zhenhua and Zhou Yanfen’s appeal against child molestation according to law. It ruled to reject the appeal and uphold the original judgment, that is, Wang Zhenhua was sentenced to five years’ imprisonment and Zhou Yanfen to four years’ imprisonment.
Wang Zhenhua was the former chairman of Seazen Holdings Co.Ltd(601155) (601155, SH). The case of molestation of a young girl occurred in 2019. After the incident, Seazen Holdings Co.Ltd(601155) share price fell sharply. Wang Zhenhua then resigned and his son Wang Xiaosong took over, and the share price gradually rebounded.
A large scandal will affect the reputation of a company, and there are similar cases abroad. For example, although Bill Gates is no longer responsible for the specific operation of Microsoft, Microsoft also experienced stock price shocks in 2021 due to its related scandals.
If the scandal is closely related to corporate governance, it will lead to a greater crisis. Earlier, Volkswagen tampered with the exhaust emission detection software, triggering the notorious “emission gate”, leading to a sharp drop in the company’s share price and a huge fine from the regulatory authorities.
comments by Professor Gao Minghua:
This case reflects the important influence of entrepreneurs’ personal character on the development of enterprises.
Entrepreneur’s ability includes entrepreneur’s human capital, relationship network ability, social responsibility ability and strategic leadership ability. Among them, social responsibility ability reflects entrepreneur’s personal character, that is, entrepreneurs should not only have the ability to run enterprises, Other stakeholders (including direct and indirect stakeholders) must also be given sufficient respect and protection.
Modern society is an era of information and big data. Every word and deed of entrepreneurs (especially entrepreneurs of listed companies) may attract social attention to enterprises. Good words and deeds are very important to the development of enterprises, while bad words and deeds, especially illegal acts, may lead to the decline of enterprises and cause huge losses to all shareholders. Therefore, in modern society, entrepreneurs must pay attention to their compliance and moral cultivation.
No.2 China Resources Microelectronics Limited(688396) : three core technicians resigned in two months, and the project was delayed, which led to speculation
From July to September 2021, three core technicians of semiconductor leading enterprise China Resources Microelectronics Limited(688396) (688396, SH) left one after another. Yu Churong was due to the expiration of the retirement and reemployment agreement, Ji Jianxin was due to personal reasons and Wang Guoping was due to job transfer.
China Resources Microelectronics Limited(688396) on the day of announcing the resignation of Wang Guoping, the third core technician, it was also disclosed that the time for one of the first equity investment projects “8-inch high-end sensor and power semiconductor construction project” to reach the scheduled usable state was postponed to December 2022.
Although China Resources Microelectronics Limited(688396) said that Wang Guoping, the resigned core technician, did not participate in the patented technology developed by the company during his tenure in the company, his resignation did not involve any dispute or potential dispute over service invention, did not affect the integrity of the company’s patent right, and would not have a substantive impact on the company’s technology R & D, production and operation. However, the combination of resignation and extension still triggered a lot of speculation in the market.
comments by Professor Gao Minghua:
This case reflects the vital role of excellent talents in the development of enterprises. Especially for technology companies, whether they can recruit and retain excellent high-tech talents is a key step for the rise of enterprises.
For excellent talents, there must be a good system to encourage talents to give full play to their potential. A good system is not only reflected in salary, but also in other ways such as platform and reputation. Now it is easy for enterprises to ignore reputation incentive and platform incentive.
Platform motivation is to enable employees to give full play to their maximum potential and recognize their abilities and contributions. For example, in the application of intellectual property rights, some enterprises only hang the name of the leader for the patent of invention and creation, and the employees have made great contributions, but there is no employee’s name. Intellectual property rights respect and value the contribution of intellectual labor. When employees’ contribution is recognized, employees are more willing to contribute to the long-term development of the enterprise.
Reputation incentive is not only to make employees have a reputation in the enterprise, but also in the whole industry and society. This requires the establishment of a market-oriented and transparent mechanism and a talent market to make the contribution of people famous. In such a market, all enterprises focus on excellent talents and dig the corner of the enterprise where excellent talents are located. At this time, this talent will appreciate. At this time, if enterprises want to keep employees, they must comprehensively use various incentive methods. The government should promote the construction of a transparent talent market mechanism and establish a mechanism for the protection of individual intellectual property rights.
No.1 Kangmei pharmaceutical: the first lawsuit of special representative, and the joint and several liability of independent director billion yuan triggered extensive discussion
Due to false records and major omissions in the annual report and semi annual report, Kangmei Pharmaceutical (now referred to as Kangmei Pharmaceutical Co.Ltd(600518) , 600518, SH) was punished by the CSRC.
In February 2021, the CSRC imposed administrative punishment on Zhengzhong Zhujiang accounting office and relevant responsible personnel responsible for the financial audit of Kangmei pharmaceutical. In April, China Securities small and Medium Investors Service Center Co., Ltd. was specially authorized by some securities investors to apply to Guangzhou intermediate people’s court to participate in the litigation as a representative. In November, the Guangzhou intermediate people’s Court issued a judgment ordering Kangmei pharmaceutical to compensate securities investors for the loss of 2.459 billion yuan.
Before the securities law was revised in 2019, the regulators’ punishment for illegal acts of listed companies was too light, which was criticized. As the first special representative litigation case of Securities Misrepresentation liability dispute in China, the “Kangmei case” has milestone significance.
One stone aroused thousands of waves, and the “Kangmei case” triggered a series of discussions on corporate governance, which had a wide impact. Taking the independent director system as an example, in the judgment of “Kangmei case”, the independent directors were sentenced to joint and several liability to bear hundreds of millions of compensation. The discussion on how the independent directors should perform their duties and bear their responsibilities was unprecedented, which promoted the revision of relevant rules and regulations.
comments by Professor Gao Minghua:
The case reflects the current embarrassing situation of independent directors. According to this case, some people think that the remuneration and risk are very asymmetric. It seems that increasing the remuneration of independent directors and providing independent director liability insurance can solve the problem of independent directors’ performance of duties.
In fact, high remuneration and liability insurance is not an effective way to solve the due diligence of independent directors.
At present, it is difficult for independent directors to perform their duties independently for the following reasons:
First, independent directors are usually recommended by major shareholders or actual controllers or their friends and acquaintances. They need to be “sensible” because they take into account the “human feelings” of the recommendation; Second, the chairman’s “number one” position makes other directors (including independent directors) have a sense of obedience; Third, more than half of the independent directors come from universities and scientific research institutions, and the selection of directors is not constrained by reputation capital due to the lack of manager market; Fourth, the proportion of independent directors is too low, which makes it difficult for some special committees that should have high independence, such as audit committee, nomination committee and Remuneration Committee, to play an independent role; Fifth, there is no clear standard for the remuneration of independent directors, and the pursuit of high remuneration is easy to lead to a common problem of “concurrence”.
Starting from the reality of China, the improvement of the independent director system should mainly focus on the mandatory and effective promotion of the government, including the improvement of the market and the improvement of laws and rules.
From the market perspective, the government should promote the construction and improvement of a transparent, competitive and professional manager market, and independent directors should be mainly produced from such a market. Transparency means that independent directors can be supervised at a low cost; Competition means that independent directors can be easily replaced if they fail to perform their duties, and competition will also reduce the compensation requirements; Professionalization means that the human capital of independent directors has specificity, and there is no way out if it is not done well. Moreover, the high recognition of the manager market also means that the resources of independent directors will continue to emerge.
From the perspective of laws and rules, the government should promote the perfection of laws and rules, create a loose environment for independent directors to perform their duties diligently and effectively, and eliminate the psychology of being afraid, unwilling and unable to perform their duties.
For liability insurance, we should realize that it has advantages and disadvantages, and the advantages and disadvantages are of the same origin. Because the liability insurance makes the independent directors do not have to worry too much about the consequences of decision-making, although it may promote the independent directors to make independent decisions, it may also lead to the independent directors to make reckless or arbitrary decisions. As long as there is no violation, carelessness is difficult to be punished. Moreover, liability insurance should first solve the problem of liability clarity, otherwise the role of liability insurance will be very limited.
