THE OBJECTIVE OF THE COMPANY

Abstract

The important role that corporate governance has played in a wide range of public companies is self-evident. Recent major corporate failures are more or less related to bad corporate governance and the increasing corporate scandals call for good corporate governance not only in China but all around the world. Corporate governance is principally about how companies are structured and directed, which is indeed a quite broad field. It is a good direction to discuss how to improve the overall corporate governance level in China through the perspective of perfecting shareholder protection. However, while running companies for shareholder interests is getting increasingly more criticisms, the so-called stakeholder model and entity model are raised as alternative approaches. Accordingly, it is the purpose of this paper to find the most appropriate corporate objective which could be applied as the starting point for future corporate governance discussion by providing a right direction for assessing and evaluating corporate performance and accountability of management. Through the comparative studies of the three models, this paper concludes that shareholder primacy is a more effective and efficient approach with regard to advancing social welfare and controlling director’s accountability among others; the other two models cannot justify substituting the shareholder model as the corporate objective.

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2014 Higher Education Press and Thomson Reuters