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This paper examines the development of the legal framework regarding fiduciary duties of directors in China. The concept of fiduciary duty was introduced by the 2005 revisions to China's Corporate Law. The implementation of fiduciary duties in China has encountered considerable obstacles because of the inherent weakness of the legal system. The legal texts are simple, vague and rigid. In the enforcement process, formalised judgments have placed limitations on precedent creation, thus reducing the deterrent effect, and the judicial system has shown reluctance to intervene in matters related to directors' duties in listed companies. There have been improvements, however. In a limited number of judicial decisions, courts have attempted to more clearly define the meaning of directors' fiduciary duties. In the penalty decisions of the China Securities Regulatory Commission (CSRC), the duties of directors have been interpreted in a more sophisticated manner. [ABSTRACT FROM AUTHOR]

The Revised Corporation Act of China threw off the restraint of traditional commission theory and adopted the fiduciary manner to define the relationship between directors and their corporations in accordance to the Anglo-American Corporation Law. However, in the new act, the provisions of director's duty are just emphasized in literal form but lack the distinction between standards of conduct and standards of review. Thus, the essentials of director's liability for compensation are vague and the business judgment rule is not included. As a result, the institutional design fails to distinguish clearly the functional boundary between the business decision-making power and the judicial review power so as to harmonize the value conflicts between director' s authority and liability and realize the institutional functions of director' s fiduciary duties. So, we ought to perfect director' s duties in our Corporation Act by strengthening director' s oversight duty, introducing business judgment rule and building more adaptable social surroundings. [ABSTRACT FROM AUTHOR]