| Abstract | Corporate governance is a collection of contracts of different stakeholders. However, the content and form of contracts in any society are born in the social structure. Without understanding the content and form of the contract, it is difficult to understand corporate governance; similarly, without understanding the social structure, it is also difficult to understand the content and form of the contract.
Originating from the Chinese traditional Confucian culture and thousands of years of history, this paper inherits the Chinese tradition of economics and history, and follows the essence of Menghe Tao (1912), Xiaotong Fei (1948) and Xuewei Zhai (2014). It regards the government behavior under the strategy of catching up and surpassing, as well as the moral tradition of inheriting Confucian culture, as the pillar of contemporary Chinese society, where the former is deeply influenced and regulated by the latter. These two factors are also the two fundamentals to form the implicit contract. Implicit contract refers to the tacit agreement that makes two (or more) individuals voluntarily recognize in their mind beyond the explicit contract. While several fields are out of government’s reach and capacity but are hardly possible to be dominated by market completely, there will be the existence of implicit contract. The extensive use of morality in economy, politics and society, contemporaneously, constitutes the soil of the existence of implicit contract. Distinguished from the explicit contract, the implicit contract is not a mutually exclusive agreement, but a spiritual agreement between the two sides of the transaction based on the approximate calculation of their own welfare and the enhancement of their total welfare; it is not a contract signed with cognition and judgment of each other at a specific time, but a contract that evolves automatically and continuously in the space-time dimension; it is not a short-term contract that ends with the termination of the transaction, but a long-term contract of little choice. Because of these characteristics, implicit contract is more appropriate for complex, inexpressible and long-term transactions. Moreover, on account of the differences in the formation time, application range and utility of the contract, the implicit contract is essentially different from Williamson's "relationship contract". The summation of implicit contracts constitutes implicit institution in society.
Taking the implicit contract as compass, the analysis mode of Chinese corporate governance can be presented at least from the following aspects. One is the implicit contract and corporate governance based on moral and ethical forces. For example, the importance of moral standards in the company's evaluation of executives; the explanation of shareholders' relationship and behavior from the perspective of kinship, geography and consanguinity; the role of family ethics in the governance of family business; the inspection of capital market within the corporate group, etc. The second is the implicit contract and corporate governance based on the government power. For example, we can understand and examine the utility of government officials from the economic and historical traditions and ethics on the basis of Confucian culture, and further understand the formulation process, implementation mode and incentive compatibility of macro policies and regulations, as well as the interaction between economic policies and micro corporate governance. The last one can be performance measurement and company value based on implicit contract, including the change of corporate valuation caused by policy and regulation and the difference between individual value and Bentham value of coporate caused by policy externality, etc.
The implicit contract perspective proposed in this paper, distinguished from the explicit contract perspective under the western model, is an effective way to explore and analyze the corporate governance under the historical traditions of eastern world. It is also in line with the spirit of the Fourth Plenary Session of the 19th Central Committee that China's modern governance system must be "rooted in China and have a deep foundation of Chinese culture".
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