Article V: The G Factor (IV) — Characteristics of Effective Corporate Governance: Board Structure and Executive Compensation

IV. Characteristics of Effective Corporate Governance: Board Structure and Executive Compensation 4.1 Governance Principles In 2018, the UK revised its latest Corporate Governance Code, comprising five themes (18 principles), all of which align closely with corporate governance regulations in most jurisdictions worldwide. The five themes are as follows: ► Board Leadership and Company Purpose; ► Division of Responsibilities; ► Composition, Succession, and Evaluation; ► Audit, Risk, and Internal Control; ► Remuneration. 4.2 Board Committees (1) Three Primary Board Committees: ► Audit Committee (sometimes called the Audit and Risk Committee); ► Nomination Committee (sometimes called the Corporate Governance Committee, or a combined committee); ► Remuneration Committee. General Requirements: The Audit and Remuneration Committees must consist solely of independent non-executive directors. A majority of members on the Nomination Committee must be independent directors; moreover, when the committee is seeking to appoint successors, the chairperson should not lead the committee. (2) Other Board Committees Some companies establish additional committees to address either temporary or ongoing issues. Examples include: ► Risk Committee—commonly established by financial services firms and composed exclusively of independent non-executive directors; ► Sustainability Committee—or committees addressing key operational risks (e.g., a Human Resources Committee or Health and Safety Committee for companies highly dependent on their workforce). These committees are not mandatory; in smaller enterprises, such responsibilities are typically handled by the Audit Committee or the board itself. 4.3 Board Structure, Diversity, Effectiveness, and Independence (1) Key to Effective Governance Since governance centers on people, two critical elements underpin effective governance: First, the board must comprise individuals possessing relevant skills and experience; Second, it must foster an appropriate board culture enabling each member to contribute meaningfully to board deliberations. (2) Diversity Board success requires multiple dimensions of diversity—though cognitive diversity remains the most vital. Other dimensions include gender, ethnicity, age, culture, nationality, socioeconomic background, and professional experience. Yet most diversity initiatives focus primarily on the most visible dimensions: gender and ethnicity. (3) Effectiveness An effective chairperson is essential to board efficiency. However, the clearest indicator of effectiveness is often the collective quality of individual board members: outstanding directors typically decline to join boards that do not permit them to make meaningful contributions. Per many corporate governance codes, boards are required to conduct board evaluations (sometimes termed board appraisals or self-assessments), which help identify issues and thereby enhance board effectiveness. (4) Independence The International Corporate Governance Network’s (ICGN) Global Governance Principles articulate an unusually comprehensive investor perspective on independence standards. These standards indicate potential independence concerns where an individual: ► Has previously served as an executive officer or consultant to the company or its subsidiaries, without an appropriate gap between such service and board appointment; ► Receives incentive-based remuneration from the company, or any fees beyond standard director fees; ► Has close family relationships with any company advisor, director, or senior executive; ► Holds overlapping directorships, or maintains significant connections with other directors through participation in other companies or institutions; ► Is a major shareholder of the company—or a senior executive or affiliate of a major shareholder—or serves as a nominee or formal representative of a shareholder or state.

Perspective | Yang Guangming & Shao Wanyi: Strategies for Contesting Corporate Control—Offensive and Defensive Design of Shareholders’ Meeting and Board Powers

One view holds that the provisions in the Company Law concerning authority constitute discretionary norms, allowing companies to adjust such powers autonomously via their articles of association. In Case No. (2017) Zui Gao Fa Min Shen 1794, the Supreme People’s Court held that the provisions in the Company Law regarding shareholders’ meeting and board powers are not mandatory provisions affecting validity; rather, shareholders lawfully enjoy the right to select managers, and correspondingly, the scope of authority granted to such managers may also be determined autonomously by the shareholders’ meeting. This judicial stance strongly supports the legitimacy of charter autonomy. Another view contends that the division of authority between the shareholders’ meeting and the board constitutes a fundamental structural element of corporate governance—and thus qualifies as a mandatory provision affecting validity—that cannot be arbitrarily modified through the articles of association. For example, in Case No. (2015) Qian Gao Min Shang Zhong Zi 61, the court ruled that resolutions concerning amendment of the articles of association or increase/decrease of registered capital fall exclusively within the competence of the shareholders’ meeting—a statutory right of shareholders. Assigning such statutorily reserved powers to the board violates mandatory legal provisions and renders the arrangement invalid. These two starkly divergent judicial positions create considerable uncertainty for practical charter design. This controversy may soon be preliminarily resolved by Article 10 of the draft Judicial Interpretation of the Company Law issued for public consultation by the Supreme People’s Court. This article explicitly negates the validity of upward or downward delegation of statutorily exclusive powers. However, it bears noting that this provision remains in the consultation phase and does not yet constitute binding judicial authority. Until its formal promulgation, the contested zone persists—precisely the gray area that parties engaged in control contests can strategically exploit. At present, drawing upon Article 22 of the newly enacted Company Law—stating that “resolutions whose content violates laws or administrative regulations are void”—and considering prevailing judicial trends, a relatively prudent conclusion emerges: For matters expressly designated by law as exclusive competences using mandatory language—for instance, amendments to the articles requiring approval by more than two-thirds of voting rights, or profit distribution requiring shareholders’ meeting resolution—the risk of such ultra vires arrangements being declared invalid remains high. Conversely, for powers enumerated in law but described in more neutral terms, greater room exists for charter autonomy, and judicial intervention is comparatively less likely. III. Offensive and Defensive Space Within Charter Autonomy: Strategic Tools Within the Boundary of Authority Statutorily exclusive powers define the baseline and red lines for the respective authorities of the shareholders’ meeting and the board—but space for maneuver still exists within those red lines. As the self-governing rulebook of corporate governance, the articles of association may, within legally permissible bounds, customize the allocation of authority between the shareholders’ meeting and the board, set varying voting thresholds, and design decision-making procedures. This space for charter autonomy functions both as an institutional tool for controlling shareholders to consolidate control and as a critical defensive mechanism for minority shareholders. Skillful use of charter autonomy often determines the fundamental outcome of a control contest even before it formally erupts. (A) Upward Delegation: Transferring Board Powers to the Shareholders’ Meeting “Upward delegation” refers to charter provisions that shift authority originally vested in the board to the shareholders’ meeting for deliberation and decision. This arrangement commonly appears in practice in the following scenarios: financial investors acquire equity stakes without participating in day-to-day operations and demand upward delegation of major operational decisions to safeguard their voice; or, in companies with relatively dispersed shareholding, minority shareholders—who cannot secure board seats—push for upward delegation to maintain oversight over management.

Crown Holdings Appoints Wayne T. Smith to Board and Audit Committee

4 days ago

Crown Holdings elected Wayne T. Smith to its Board and Audit Committee, increasing membership to eleven. Smith previously served as CEO of BASF Corporation and currently chairs Air Products and Chemicals.

Stock Titan

2026-10-22

Crown Holdings, Inc. Elects Wayne Smith to Its Board of Directors

2026-10-23

Crown Holdings adds former BASF Corporation CEO to its board

2026-10-26

Crown Holdings Appoints Wayne T. Smith to Board and Audit Committee

Crown Holdings Appoints Wayne T. Smith to Board and Audit Committee

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