Good corporate governance is crucial for the long- term success of Chinese economy. To achieve good corporate governance, legal liability is essential, because only legal liability can deter serious managerial misbehavior. Legal liability comes from both public and private enforcement of law, but public enforcement of law has various limitations. In private enforcement of law, the derivative action is preferable to the securities class action, not just because the later is unrealistic in China. For the derivative action to become a reality, appropriate legal rules should be in place....