Regulating the Personal Affairs of Directors and Executives of Listed Companies: Three Dimensional Approach of Corporate Organization Law, Conduct Law and Information Law

Abstract

The personal affairs of directors and executives of listed companies attract the attention of investors, and affect the company’s stock price and future development. This shows that the personal affairs of directors and executives of listed companies, especially star CEOs will have a substantial impact on corporate governance, corporation interests and shareholders’ rights, which is no longer an extra-legal space, and gradually evolved into two types of affairs: the “corporate nature” in the private field and the “quasi-commercial nature” in the corporate field, which should be included in the scope of regulation. In view of the dual particularity of subject identity and occurrence field, the regulation of the two types of personal affairs will be a tripartite problem spanning the binding contract under corporate organization law, the fiduciary duty under corporate conduct law and the information disclosure rules under corporate information law. Therefore, it is necessary to uphold the logic of typing according to the different types of private affairs. At the level of corporate organization law, the company attempts to restrict and regulate the personal behavior of directors and executives through the ethics code with positive incentives and the Weinstein Clause with negative binding. However, organization law usually only applies to personal affairs in the workplace, and the restraint and enforceability of the internal ethics code should be strengthened. At the level of corporate conduct law, the fiduciary duty is the main countermeasure to solve this problem. The current derivative litigation on personal affairs and the literary interpretation of fiduciary duty make it difficult to incorporate personal affairs into their regulatory scope. Therefore, it is necessary to explain the duty of loyalty with the purpose to protect corporate interest and expand the supervision connotation of the fiduciary duty of directors and executives. At the level of corporate information law, since the specific personal affairs of directors and executives will affect their ability to perform their duties and the investment decisions of investors, there is an urgent need to construct an information disclosure mechanism for the personal affairs of directors and executives of listed companies. The things which need to be disclosed should be limited to specific personal matters, with “significance” as the standard, while the relationship with personal privacy should be handled. The solution to this new type of problem in the field of corporate governance not only demonstrates the value of investor protection, but also reflects a fact at a deeper level: The regulation of the personal affairs of directors and executives of listed companies is a complex script which requires multiple methods to be used in conjunction and to make active changes to these methods.