Viewpoint | Talking about the Employee Director System

According to Article 67 of the Company Law, a wholly state-owned company shall have a board of directors, which shall exercise its functions and powers in accordance with the provisions of Articles 46 and 66 of this Law. The term of office of a director shall not exceed three years. The members of the board of directors shall include representatives of the employees of the company. As can be seen from the provisions of this article, the board of directors of a wholly state-owned company must have employee directors.

According to the second paragraph of Article 44 of the Company Law, a limited liability company established by two or more state-owned enterprises or two or more other state-owned investment entities shall have representatives of the company's employees on its board of directors; other limited liability The company's board of directors may include company employee representatives. As can be seen from the provisions of this article, the board of directors of wholly state-owned companies must also have employee directors.

According to Article 17 of the "Regulations on the Work of Grassroots Organizations in State-owned Enterprises of the Communist Party of China (Trial)" (hereinafter referred to as the "Regulations"), adhere to and improve the employee director system and the employee supervisor system to ensure that employee representatives participate in corporate governance in an orderly manner. Article 39 stipulates that these regulations shall apply to wholly state-owned enterprises, wholly-owned enterprises and enterprises with absolute control of state-owned capital. Enterprises with a relative holding of state-owned capital and actual control shall be implemented with reference to these regulations in combination with actual conditions. According to the Regulations, state-owned capital absolute holding enterprises should "adhere to and improve the employee director system". However, in practice, whether the state-owned capital absolute holding enterprise must set up employee directors, after our lawyers searched the relevant judgment cases, many courts did not determine that the state-owned absolute holding enterprise should set up employee directors, that is, the state-owned absolute holding enterprise did not set up employee directors, does not lead to the relevant shareholders' meeting resolution is invalid. See:(2021) Jin 02 Minzong No. 5268 Civil Judgment;(2017) Beijing 01 Minzong No. 7398 Civil Judgment.

The "the People's Republic of China Company Law (Revised Draft for Three Reviews)" (hereinafter referred to as the "Revised Draft") has new changes to the establishment of employee directors. The revised draft expands the scope of enterprises that must have employee directors, that is, Article 68 stipulates "The board of directors of a limited liability company shall have more than three members, and its members may have company employee representatives. A limited liability company with more than 300 employees shall have representatives of the company's employees among its board of directors, except for those with a board of supervisors and representatives of the company's employees in accordance with the law." The revised draft further strengthens the democratic management of the company, safeguards the legitimate rights and interests of employees, and extends the application of employee directors to limited companies with more than 300 employees. The establishment of employee directors is no longer the responsibility of state-owned enterprises. At present, the revised draft has not yet taken effect. It is suggested that the company should pay attention to the promulgation of the new law and adjust the setting of employee directors in a timely manner.

In addition to the above-mentioned types of situations, the existing laws and regulations and local documents do not clearly stipulate the establishment of employee directors in other types of state-owned companies, such as state-owned capital relative holding companies and state-owned shareholding companies. For situations where there are no mandatory provisions in the above-mentioned laws, it is recommended that companies actively communicate with state-owned assets authorities and higher-level groups on the establishment of board of directors to ensure that they not only meet the requirements of local regulations and policies, but also ensure that the establishment of internal employee directors is legal and compliant.

Although the employee directors are democratically elected by the employees of the company through the employee representative assembly, the employee assembly or other forms, while the non-employee directors are elected by the shareholders (large) assembly, the two are elected in different ways, but the employee directors, as directors, must first meet the qualifications of the directors, that is, it should meet the relevant provisions in Chapter 6 of the Company Law "Qualifications and Obligations of Directors, Supervisors and Senior Managers of the Company.

According to the Opinions of the All-China Federation of Trade Unions on Strengthening the Construction of the Employee Director System and the Employee Supervisor System in Corporate Enterprises and the Measures for the Management of Employee Directors in Pilot Enterprises of the Board of Directors of Wholly State-owned Companies (for Trial Implementation), the qualifications of employee directors are divided into positive and necessary positive conditions. Conditions and negative conditions that cannot be held. Positive conditions include: (1) the employee director has a legal labor relationship with the company; the (II) can represent and reflect the opinions and requirements of the employees, safeguard the legitimate rights and interests of the employees and the company, and be trusted and supported by the employees; (III) familiar with the operation and management of the enterprise or have relevant work experience, have a certain ability to participate in business decision-making and coordination and communication; (IV) abide by the law, have good conduct, act impartially, Integrity and self-discipline, as well as compliance with other company requirements and other underwriting conditions. Negative conditions include: (1) The company's senior managers and their close relatives shall not (concurrently) serve as employee directors; (II) the secretary of the party committee (party group) of a wholly state-owned company and the deputy secretary of the party committee and secretary of the disciplinary committee (discipline inspection team leader), the company's general manager, deputy general manager, and chief accountant shall not serve as employee directors.

In combination with the above provisions, our lawyers suggest that the selection of employee directors, the company should comprehensively combine the candidates' qualifications and working ability, and can skillfully use the positions of employee directors to realize the rationalization of the board of directors. At the same time, due to the large overlap between the responsibilities of the chairman and vice chairman of the trade union and the employee directors, they can represent and reflect the opinions and requirements of employees to a certain extent, and have certain business decision-making and coordination and communication skills, candidates available as employee directors.

According to Article 44 and Article 108 of the "Company Law", the employee representatives on the board of directors are democratically elected by the company's employees through the employee representative assembly, the employee assembly or other forms. The "Opinions of the All-China Federation of Trade Unions on Strengthening the Construction of the Employee Director System and Employee Supervisor System in Corporate Enterprises" stipulates the nomination, election and filing process of employee directors.

Candidates for employee directors and employee supervisors can be nominated by the company's labor union based on self-recommendation and recommend, on the basis of fully listening to the opinions of employees, or they can be jointly recommended by more than 1/3 employee representatives or more than one-tenth of employees. Nominated by the joint meeting of the Workers' Congress. The company's party organization shall review and report to the higher-level trade union; a company without a party organization may be reviewed by the higher-level trade union organization. The chairman and vice-chairman of the company's trade union shall generally be candidates for employee directors and employee supervisors.

Employee directors and employee supervisors shall be elected by secret ballot by the company's workers' congress, and only with the consent of more than half of all representatives of the workers' congress. If the workers' congress has not yet been established, it should be established first under the leadership of the enterprise party organization and the guidance of the higher-level trade union.

After the employee directors and employee supervisors are elected by the workers' congress, they shall be publicized before appointment, perform relevant procedures like other directors and supervisors, and report to the superior trade union and relevant departments (institutions) for the record. The trade union of the Company shall do a good job in reporting to the superior trade union.

Our lawyers suggest that companies that set up employee directors should standardize the selection process of employee directors and employee supervisors, ensure that the procedures are legal and compliant, fully reflect the demands of employees, and avoid causing employee directors to "exist in vain".

The term of office of employee directors is the same as that of other directors. At the expiration of the term of office, they can be re elected; if the employee directors and supervisors leave their posts due to resignation, illness, job transfer, etc., or are unable to perform their duties due to the change, termination or termination of labor relations, their qualifications shall be terminated by the workers' Congress. The removal of an employee director shall be jointly proposed by more than 1/3 of the employee representatives or more than one-tenth of the employees, and shall be discussed and approved by the workers' congress. The removal motion shall be voted by secret ballot and approved by more than half of all the representatives of the workers' congress. Passed. After the recall case is passed, the company's trade union shall report the results of the recall to the higher-level trade union and relevant departments for the record; if there is a vacancy in the employee director, the company's trade union shall organize a by-election as soon as possible, and the by-election procedure shall be the same as the procedure.

According to the "Opinions of the All-China Federation of Trade Unions on Strengthening the Construction of the Employee Director System and the Employee Supervisor System in Corporate Enterprises", the powers of employee directors include participating in board meetings, exercising the right to speak and vote of directors; fully expressing opinions when the board of directors studies and decides on major issues of the company, and determining the appointment and dismissal of the company's senior management personnel, truthfully reflecting the democratic evaluation of senior management personnel by the workers' congress; put forward opinions and suggestions on board proposals and plans involving the legitimate rights and interests of employees or the vital interests of most employees; put forward board issues on rules and regulations or major issues involving the vital interests of employees, and submit a board meeting in accordance with the law to reflect the reasonable requirements of employees and safeguard employees Legal rights; attend company administrative office meetings related to their duties and important meetings related to production and operation; the company's labor union and relevant departments of the company are required to report relevant information and provide relevant information; truthfully report the situation to the company's labor union, superior labor union or relevant departments; other rights stipulated in laws and regulations, rules and regulations and the company's articles of association.

Our lawyers believe that employee directors are not only a manifestation of the right to exercise the duties of directors on behalf of employees, but also a responsibility and obligation. Employee directors should have the duty of loyalty and diligence to the company and employees, and cannot represent the legitimate rights and interests of the company and employees., Candidates who use their powers indiscriminately should also be corrected in time through procedures such as removal and dismissal.

(The laws, regulations and related materials in this article are searched and sorted out by Zhao Shengze (master's degree student of Shandong University).)