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Apart from that, as far as the writer sees, some vaguely illustrated provisions are accountable for the institutional defects. For instance, provisions on obligations of fidelity and diligence are too vague to be enforceable in practice. Thus, the effectiveness of the provisions is inevitably reduced. According to Art 148 of The 2006 Company Law, “The directors, supervisors and senior managers shall comply with the laws, administrative regulations, and articles of association. They shall bear the obligation of fidelity and diligence to the company.” Under this abstract provision, it is uncertain that to what extent the directors and supervisors would be liable for these duties. Independent directors also owe similar duties and obligations, which is prescribed as “An Independent director has a fiduciary obligation and an obligation of diligence toward the listed company and all its shareholders. An Independent director should pursuant to the requirements of the relevant laws and regulations, these Guiding Opinions and the company’s articles of association, conscientiously perform his duties and responsibilities, safeguard the company’s overall interests and, in particular, pay attention the lawful rights and interests of small and medium shareholders are not prejudiced. ”Moreover, Art 50 of “Notice on Issuing the Guideline on the Management of Listed Companies ”formulates that“ the independent directors of a listed company shall bear the obligations of good faith and diligence to the listed company and all shareholders hereof. The independent directors of the listed company shall seriously fulfill their duties, maintain the integrated benefits of the company, and especially prevent the lawful rights and interests of small and medium shareholders from being damaged according to the relevant laws, regulations, and the bylaws hereof. An independent director shall fulfill his duties independently, shall not be influenced by the principal shareholders, the actual controllers of the company, or other units or individuals with interest relations to the listed company.” They are all not clear enough. China, as a country following the civil law tradition for decades, takes an exclusive approach, namely that the courts (other than the Supreme Court) cannot be allowed to interpret laws and people may do whatever they want to as long as they are not prohibited by laws, which in most cases mean written codes.Therefore, further concrete descriptions of fidelity and diligence obligations are in urgent demand. In this aspect, we may make reference to relevant legislation in the common law jurisdiction.
For example, as S.H.Goo and Anne Carver describe, “ There are three broad categories of duties owed by directors. These are, essentially, fiduciary obligations, duties of skills and care, and statutory duties.” [FN15] “The fiduciary aspect of a director is all encompassing and covers all aspects of a director’s duties and obligations, including the duty to ensure that he acts with appropriate skill and care and complies with all statutory obligations.” The fiduciary duty reflects as follows:“(A) the duty to act honestly in what he considers to be in the company’s interest.(B)The duty not to place himself to in a position where his duty to the company and his own interests may conflict ,and (C)The duty to use his powers as director for the proper purpose of the company.” [FN16]There is a very technical description about “Acting for proper purposes and in the best interest of the company”. It is prescribed as “ On the face of it, there may seem to be no difference between in the best interest of the company and for the proper purposes of the company. Yet, there is a difference. In acting for the proper purposes of the company, a clearly objective standard can be applied to ascertain what is the proper purpose s of the company. However , in acting in the best of the company, a subjective element is imported, in that the action of the director is called into issue. ” [FN17]
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