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Lessons

From Jun'an Securities, we can learn the following lessons:

A company should create and maintain a functional corporate governance mechanism that satisfies the requirements of a modern business system. A company with a relatively balanced or dispersed ownership structure should make an effort to prevent "insider control." Shareholders should specify in the Articles of Association the subjects of deliberations and rules of procedure of a shareholders' meeting and a board of directors meeting. Shareholder representatives should faithfully discharge their duties in the exercise of rights on behalf of shareholders and protect the legitimate rights and interests of shareholders. The board of directors should comply with the provisions set forth in Chinese laws and regulations and the company's Articles of Association in the exercise of power, and should also keep officers in check. The board should also have a considerable number of independent directors who are expected to play a watchdog role. Qualified candidates who can represent and safeguard the interests of various interest groups should be recommended and selected for members of the board.

- A company with a relatively balanced or dispersed ownership structure should create and maintain practical incentive and restraint mechanisms. It should design a relatively reasonable employee compensation plan and scientifically proven performance assessment indicators and make the best of equity incentive plans (e.g., cash or stock options) and performance assessment to encourage management members to deliver their best performance.

- A company should enable the supervisory board, or a like committee, to fulfill its role to supervise the management in all activities and particularly to oversee the company's financial activities and carry out independent audits. Qualified candidates with professional backgrounds (e.g., financial, legal, or management) and sufficient time and energy to fulfill the duties should be recommended and preferred as members of the supervisory board.

 
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