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And then what is corporate governance? In China, there are several opinions: 1) corporate governance is a series of legal systems which protect the interest of the firm, the shareholders and the creditors (CUI QINZHI); 2) corporate governance is to deal with the relations between the managerial staff and the shareholders in order to balance the interests among the stakeholders. (XU XIAOSONG, Professor teaching China university of political science and law); 3) the corporate governance’s whole content is not only to stimulate every kind of stakeholders but also to restrict them so that to balance the interests and the obligations among the stakeholders on the basis of series of contracts (WEI JIE) .（3）
In my opinion, in China the corporate governance, the internal governance compared with the external governance under the capital market, is an arrangement of systems through which the interests of shareholders including the large and the small, the managerial staff and the employees can be adjusted to be balanced.
B. The model of corporate governance in China
There are two models of corporate governance in the world, the One-tier System and the Two-tier System. Under the One-tier System which is also called the Anglo-American System, the corporate governance system is composed of two parts, one of which is the assemble shareholders meeting which owns the highest power of the firms such as the power to elect and to dismiss the directors, the other is the board of the directors includes the managing directors whose duty is to manage the business of the firms and the independent directors whose duty is to supervise the behavior of the managerial staff including the managing directors and the managers. So the management organ and the supervisory organ are the same organ—the board of directors.
However, under the Two-tier System that is also called the Germany-Japan System, the management organ is separated from the supervisory organ. The corporate governance system is composed of three parts, one part of which is the assemble shareholders meeting whose duty is the same as that under the One-tier System, one part is the board of directors whose duty is as the same as that of the managing directors under the One-tier System, another part is the supervisory board whose duty is the same as the independent directors’ under the One-tier System. （4）
In China, the existing corporate governance system established by the COMPANY LAW of 1993 is Two-tier System, （5）which is the same as that in Germany and Japan, the separation between management organ and supervisory organ. In China, the corporate governance system is composed of the assemble shareholders meeting who has the power to elect the directors and the supervisors, the board of directors who has the power to deal with the daily business and the supervisory board who has the power to supervise the managerial staff.
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