Corporate Governance in China December 19, 2016 Gabriella Russo Research Question What effect does the Communist Party have on corporate governance in China and how has it influenced the current system of corporate governance in China? Literature Review Corporate governance represents the structure associated with the management of activities at a firm in a manner that ensures the protection of the shareholders’ residual claims. Further, the concept elaborates the mechanism instituted at the organizational level to ensure that business operations conform to various legal, ethical, and social expectations. China represents one of the most dynamic and fast growing economies across the globe. The expansion of the Chinese market highlights the necessity for the adoption of business practices that reflect not only the national conditions but also international practices (Holmes & Wong, 2015). Issues concerning culture, laws, enforcement, and the constitution of boards in the Chinese environment should be reconsidered for China to sustain its momentum as one of the dominant emerging economies. The “Code of Corporate Governance for Listed Companies in China” provides the legal framework that underlines the structure approved for Chinese businesses (Holmes & Wong, 2015). The regulations indicate that organizations should follow the two-tier structure for the board that includes the supervisory and board or directors. However, the control of the Chinese
Corporate governance in itself has no single definition but common principles which it should follow. For example in 1994 the most agreed term for corporate governance was “the process of supervision and control intended to ensure that the company’s management acts in accordance with the interest of shareholders” (Parkinson, 1994)1. Corporate governance code is not a direct set of rules but a self-regulated framework which businesses choose to follow. This code has continued to change in the past 20 years in accordance with what is happening in the business world. For example the Enron scandal caused reform in corporate governance with the Higgs Report which corrected the issues which were necessary. Although it does not quickly fix problems, it gives a better framework to
Phenomenal growth of interest in corporate governance has emerged in recent years. The body of literature on the subject has grown markedly in response to successive waves of large corporate failures. Furthermore, there have been numerous attempts to define what constitutes ‘good corporate governance’ and to provide guidelines in order to enhance the quality of corporate governance.
Up to now no specific world-wide common understanding or single definition for “corporate governance” has been established. More generally, corporate governance can thus be understood as the totality of all national and international regulations (e.g. Sarbanes-Oxley Act), rules, values and principles (e.g. UK’s “Code of best practices”) that apply to businesses and determine how they are steered and monitored.
The biggest problem of Alibaba Corporate Governance is management powers, because Alibaba Corporate Governance structure lack of stockholder rights and independent board representation to select board members and have a nominal in the management of the company. Although the board of directors in publicly traded companies always fail in their responsibility to protect the interests of shareholders. Alibaba has deprived even this minimal power ways from shareholders which isn’t sufficient respect of shareholder rights in the structures being proposed. In Alibaba has a permanent lock on control of the company but hold only a small minority of the equity capital known as the Alibaba Partnership. This
When people have imbalanced access to work, housing, healthcare, ownership, education, et cetera, inequality is present. Inequality affects everyone in the world and comes from people’s fears of one another and other people’s opinions.
The Chinese government is highly involved in business practices, unlike the American government. Their government plans China’s economy; therefore, it can be difficult for Americans and other foreigners to understand and work with them. Those making major business decisions need to understand Chinese government regulation and involvement in business practices. Chinese law lacks consistency and the their government has the right to change the standards at anytime without notice.
The first major misconception that I had was just what a Communist government means to today’s China. When Americans think of the term ‘Communism,’ the first things that spring to mind is oppression and fear; the concept of ‘red’ Communist ideals maintained by Joseph Stalin. While it’s true that China did once have this kind of government under Mao Zedong, the current system is quite different. The Communist Party is merely a party name, the same way Democrats and Republicans are in America. The difference is that China is only under the one party’s rule. The country
The Communist Party of China is based on ideology and politics, where the majority of policies are derived from the people’s will. The Communist party tends to be made up of high ranking officials in a tight net community with a lot of power. (Chinatoday Resources, 1997) This government is known for needing to be in control of everything including; education, media, and business to name a few. Recently the Chinese president has
On April 17, 1989, thousands of student protesters flooded Tiananmen Square, Beijing, to mourn Hu Yaobang’s death. Yaobang was the former General Secretary of the Communist Party and also served as a symbol of political reform and anti-corruption. The students asked the government to end corruption and to give political and economic reform. Demonstrations spread to different cities, with workers joining in. They complained about money and housing issues. The spread of the demonstrations concerned Party leaders, who thought there was going to be rebellion from the protesters. Li Peng, who ranked second in the Party, believed that they should “nip it in the bud,” while Party General Secretary Zhao Ziyang thought that Yaobang’s memorial
China’s thicket of regulations has been cut back and the rules that remain have gradually become more institutionalized. The picture that characterized much of the 1980s and 1990s—everyone from multinational managers to Chinese officials groping their way forward, often making things up as they went along—is no longer representative of the business environment. Foreign firms in different sectors have greater understanding of the
In recent years the issue of corporate governance has become a keenly debated topic in international finance. In developed countries, some of the biggest corporate collapses in history have brought about a change in focus. No longer are governments and lawmakers trying to deregulate and reduce the controls and disclosure requirements of corporations. The deregulation boom has ended, as regulation comes back into the picture.
The impact of culture on the development, implementation and enforcement of recently revised corporate governance regulations and requirements now insists upon organizations today to be increasingly accountable to mandated laws, regulations and standards on several different dimensions. It made public companies more expensive to run. It has been stated that by a company’s fourth year of
The article “PetroChina: International Corporate Governance with Chinese Characteristics” describes the major concerns about PetroChina’s corporate governance when and after it was listed on NYSE and HKSE, which was the first Chinese state-owned enterprise launched IPO overseas. This paper is based on the information provided by the article and will discuss in three aspects: Firstly, why corporate governance was important for China’s SOEs? Secondly, what were the special problems associated with PetroChina’s corporate governance model and what could be done to improve it? Finally, the postscript: the things I learn from this case study.
China’s accession to the WTO in 2001 has helped shape its economy to becoming a more predictable environment for trade and foreign investment. Corporate governance and frameworks for business operations and interactions have improved, providing a much more transparent environment. (Deckers, 2004)
Political & Legal environment: The political system of a country is an important part of a companies marco-environment. ‘Who governs the country?’ ‘What does the government follow?’ and ‘What legal regulations follow from these policies?’. The most important factors a company is subject to are policy uncertainty, macro instability, and tax rates. Considering China is a country in transition all of the above factors are subject to change, to a degree substantially larger than it is in stable developed countries. We have recently seen changes happening in China on all of the above factors. One example is the new regulations regarding copying, which turned out in favor of Starbucks. However, what will happen in the (near) future is hard to tell. Whatever happens though, Starbucks will be subject to the consequences, whether positive or negative.