Author
Ms Yuchen Yao
Organisation/Institution
Tsinghua University School of Law
Country
CHINA
Panel
Corporate Law and Governance
Title
Judicial Review Process of the Reasonableness of the Executive Compensation in Company
Abstract
China’s current law and practice are too general and one-sided in dealing with the issue of the executive compensation, and China has not yet been able to establish a clear and operable judicial review process about this issue. The U.S. framework for handling conflict-of-interest transactions could offer valuable insights. In China, In terms of subject of ratification, the supervisory board does not yet play a significant role in ensuring procedural fairness. If the compensation is proven by the defendant to have been approved by a majority of independent and informed disinterested directors or disinterested shareholders, the compensation is presumed to be fair and the burden of proof shifts to the plaintiff. This would be more reasonable than applying the business judgment rule and limiting judicial review to just whether the compensation is a waste. If the compensation proves to be unreasonable, the interested director or officer who violates the duty of loyalty should at least return the excessive compensation and may be liable for interest damages, etc. If a non-interested director breaches a duty of care or an interested shareholder breaches a fiduciary duty, the plaintiff may also claim corresponding liability, but not duplicative liability. The reasonableness of the compensation has to be determined on the facts of each case, but there are still several considerations that help to assess it.
Biography
Yao Yuchen is a Ph.D. candidate in Civil Law at Tsinghua University Law School under the supervision of Professor Cui Jianyuan. She was also a Recognized Student at the University of Oxford, working with Professor Donal Nolan. Her research focuses on property law, contract law and corporate law, with multiple award-winning papers published in prestigious legal journals, like ‘Private Law’( a CSSCI journal hosted by Peking University). She has received numerous academic honors, including the 20th Jiangping Civil and Business Law Scholarship, and the O’Melveny & Myers Beijing Legal Scholarship Nomination. In addition to her research, she has been recognized as an Excellent Teaching Assistant and actively contributes to legal academia. She has also gained practical experience through internships at leading law firms such as King & Wood Mallesons and courts. She holds the PRC Bar Qualification and Securities Qualification.
