Three Problems in Co-governance Mechanism

Since the middle of 1980s, the stock structure of English and US enterprise has extremely dispersed, and the governance mode of “stockholder first” has been suspected extensively because many problems such as the protection of middle and small sized stockholder benefit and anti-annexing, and the problems of interior personnel control and agent costs are more and more serious. After that, the theory of stakeholder occurred, so these theories compose the base of co-governance mode.

Since the middle of 1980s, the stock structure of English and US enterprise has extremely dispersed, and the governance mode of "stockholder first" has been suspected extensively because many problems such as the protection of middle and small sized stockholder benefit and anti-annexing, and the problems of interior personnel control and agent costs are more and more serious.After that, the theory of stakeholder occurred, so these theories compose the base of co-governance mode.
The theory of stakeholder roots in incomplete contract theory and modern property right theory.The contract theory thinks that enterprise is a group of connection point and agent relationship of contract, ad every contract participator provides individual resource to the company, and so every one should enjoy the right of equal negotiation (Chen, 1996, p.103-107).At the same time, enterprise is team production in fact, and its essential is the mutual dependence between human resource and non-human resource.To protect the dependence resource to avoid loss, team members should make long-term contract to ensure an anticipated compensation, which offers base for stakeholders' co-governance.However, Hart pointed out that contract was incomplete because the existences such as trading charge, opportunism behavior, human limited sense and information asymmetry.So the property right can be divided into special rights and residual rights.The residual right is the property right which is not definitely confirmed because of the incompleteness of contract, and it is a sort of "state-contingent ownership", i.e. different persons possess residual claim rights and residual control rights under different status (Zhang, 1999, p.52-53).And professor Zhang, Weiying utilized mathematical model to prove it.
According to the theory of contract, all participators of enterprise contract should enjoy the allocation right of enterprise residual rights.However, how to exactly confirm stakeholder of enterprise and avoid the problems of enterprise object diversification and governance efficiency becomes into the focus that mainstream economists suspect the co-governance mode.

Problem of "confirmation of stakeholder"
The most important reason that mainstream economists criticize the co-governance mode is that it can not confirm enterprise stakeholder.Because the boundary of basic concept is not clear, so the theory of stakeholder can not confirm a specific research object.In fact, according to 27 sorts of representative definition, we found that most scholars tended to confirm the stakeholder from combination association and investment specialization, and they thought stakeholders mean some persons who implemented certain special investment in enterprise, and these persons were associated with enterprise and the association degree was decided by the size of investment specialization.
Therefore, the confirmation of stakeholder is decided by three factors.First, stakeholders must implement special investment to the enterprise.Second, stakeholders assume certain management risk of the enterprise.Generally speaking, the size of risk is closely related with stakeholders' investment specialization degree in the enterprise.Third, according to Freeman's classic definition, stakeholders must be related with the activities of enterprise, and this sort of relationship may be active or passive.
However, the confirmation of stakeholder doesn't mean that the stakeholders' characters are grasped.We still need to utilize some dimensions to classify numerous stakeholders.In 1997, Mitchell studied the production and development history of stakeholder theory, and put forward the grading method to confirm stakeholders.Mitchell put forward three characters including validity, right and emergency and graded stakeholders, and he divided stakeholders into three sorts, i.e. (1) confirmed stakeholders, they possess validity, right and emergency for corporate problems simultaneously such as stockholder, employee, creditor and employee, (2) anticipated stakeholders, they keep close association with enterprise and possess two items of above three characters, (3) potential stakeholders, they only possess one item of above three characters (Yang, 1998, p.38-45).
In theory, all owners who fulfill three key factors should participate in corporate governance.However, the actual organizational trading costs are not ignored.The confirmation of reasonable dimensions should follow the balance principle of main principle dimension, and adopt marginal analysis decision method, i.e. when the income brought by the increase of factor is equal with added organizational cost, to decide the optimal dimension of effective governance structure.
Suppose there are m sorts of factor main bodies in enterprise, and obviously, investor is one necessary main body in enterprise contract, i.e. n=1.However, though stockholders have higher individual incomes, but it will induce the decrease of corporate net income.When the quantity of governance main body is n, the corresponding corporate net income is , and Where, is the benefit of governance, is the organizational cost.When , the cost charge will increase and the income continually decreases, so the net income of enterprise may be negative.That is to say, there is a critical value in n to make when .Professor Lu, Changcong obtained similar conclusion by the social cost analysis method.
So the right main body should be kept in the status of n 1 in the governance structure.According to the Mitchell grading method and combining with the actual situation of china enterprise governance structure, in this article, we think the optimal dimensions of governance main body should be four to six, and include multiple benefit main bodies such as stockholder, creditor, manager and employee.

Problem of "object diversification"
In the governance mode of "stockholder first", the corporate object is represented as the value maximization of stockholder.So the corporate object of co-governance is to pursue the stakeholders' benefit maximization, and corporate manager should not only consider stockholders' investment return, but also care for the benefits of stakeholders such as employee and creditor.But the benefit relationships among stakeholders are very complex and contrary, and they can not be quantified exactly, so in practice, they can not be realized and will induce interior manager control.and as one subsystem and the realized base of corporate value, the financial object is to allocate corporate resource and ensure the increase of corporate value.When corporate value can not be quantified, the financial object of enterprise should be the fist selection of the value maximization of enterprise (Du, 2005, p.7-8).Only the financial object of enterprise is ensured, others' benefits can be realized, i.e. efficiency first and then justice.
In this article, we thought the reason of object problem is the confusion of corporate object and financial object.The corporate object of co-governance is to pursue the stakeholders' benefit maximization, and as one subsystem and the realized base of corporate value, the financial object is to allocate corporate resource and ensure the increase of corporate value.When corporate value can not be quantified, the financial object of enterprise should be the fist selection of the value maximization of enterprise (Du, 2005, p.7-8).Only the financial object of enterprise is ensured, others' benefits can be realized, i.e. efficiency first and then justice.
Though we have confirmed the financial value guidance of co-governance enterprise object, if we have not a specific representative financial index, we will get in the tautology with another form (Zhang, 2002, p.109-112).When enterprise uses all stakeholders' resources to create mutual financial values, all costs relative to resource are individual value factors irrespective with mutual object, and all stakeholder resource costs except for financial value (profit of resource cost) are mutual value objects, which also represents all stakeholders' mutual cake.
From another angle, when putting enterprise on the supply value chain of the whole market, the difference between values obtained from the lower customers and values paid to the upper suppliers is the value distributed in the market value chain, which is called as total value added (TVA), and it belongs to same value connotation denoted from different angles with the "resource cost profit" obtained in the interior value of enterprise, and both of them are financial indexes to represent stakeholders' mutual benefits.Different with the unit value which pursues income maximization of every share in the stockholder value maximization theory, TVA in the logic of stakeholder can not be unified, because different natures of stakeholder resource have not the mutual share base "n" which can be compared (Li, 2003, p.20-21).