Governance Case

Discussion question

1. In my country, there are many methods to Providing incentives to executives for good behavior:

a. Identify the basic salary and welfare to protect the enterprise operators' life.

b. Encourage the enterprise operators with immediate interests and long-term interests.

c. The most important thing is to establish executive stock options which means enterprise operators could buy stocks from the company and the shareholders would like to reduce their stocks.

d. Improve the social status of the enterprise operators. This is an spiritual incentive to give enough respect to those managers.

2. Closely monitoring the executives:

a. For internal supervision system, Firstly, the company should strengthen the board of directors' supervision of managers, meanwhile, it should also strengthen the board of supervisors' monitoring of the board of directors and managers. Secondly, the company should set up internal audit department. Thirdly, it should also improve financial system.

b. For external supervising system, our country strengthens the executive operators market, stock market and commodity market.

3. Providing punishments to executives for bad behavior.

In our company, the laws will punish those executives with bad behavior, penalty or even in jail, and the company will also fire the executives.

All in all, all the methods to solve agency problems are confirmed to be worked, considering that the agency market in China is not mature enough, we are still searching for more effective methods. For example, Zhangyu Group is an successful case to resolve state-owned enterprise agency problem via share transfer to all staff.