PUBLICATIONS & REPORTS

Contents Introduction

This paper studies a case of corporate governance scandal of MXEP. The analysis shows that there was an institutional vacancy in MXEP corporate governance during the period. We find that the internal disciplining mechanism of two-board system was not effective especially when MXEP’s majority shareholder was the private group and the major reason of MXEP corporate governance failure was not caused by lack of autonomy inside the company, but short of checking and balancing power for its top management. By reviewing the process of China’s SOE reform as well as the major policies, I find that too much attention has been paid to decreasing government intervention while the constraining mechanism for manager’s power discretion has been relatively neglected in the reform course. This one sided focus on decreasing government intervention have made management discretion become the major agency problem of China’s corporate governance. There are two implications we may get from these analysis. The first one is that government intervention and the market internal logic may be complements rather than substitutes at least in current China’s condition. The second one is that the recent reform measures, including the implementation of revised laws as well as shareholding reform, cannot strengthen the monitoring role on top management in the perspective of internal governance. So we think that China should explore new way to improve the internal corporate governance for restricting on the authority abuse of top management.