Corporate governance in china some experiences and lessons
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EACGD Conference, Tokyo. Corporate Governance in China: Some Experiences and Lessons. Dr. GUO Li 郭 靂 Law School Professor Peking University 北京大学 2012-07-06 [email protected] Will the Corporate Governance Converge?.

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Corporate Governance in China: Some Experiences and Lessons

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Corporate governance in china some experiences and lessons

EACGDConference, Tokyo

Corporate Governance in China:SomeExperiences and Lessons

Dr. GUO Li 郭 靂

Law School Professor

Peking University 北京大学

2012-07-06

[email protected]


Will the corporate governance converge

Will the Corporate Governance Converge?

  • Henry Hansmann and Reinier Kraakman, The End of History for Corporate Law, 89 Geo. L.J. 439(2001).

  • The Manager-Oriented Model:1930-1960 U.S.

  • The Labor-Oriented Model: Germany

  • The State-Oriented Model: Japan

  • Stakeholder Models: Company Social Responsibilities?

The Shareholder-Oriented Model


Corporate governance difference and convergence

Corporate Governance: Difference and Convergence

  • Chinese Corporate Governance Model (in the book)

Shareholder’s meeting

Board of Directors

Board of

supervisors

managers


The us corporate governance model

The US Corporate Governance Model

  • One Board

Shareholder’s meeting

Board of Directors

Committees(Audit,

Nominating, and compensation)

managers


German corporate governance model

German Corporate Governance Model

  • Two-tier Board

Shareholder’s meeting

(bank, state)

Board of supervisors

(codetermination)

Board of directors

managers


Choose of the models

Choose of the Models

  • Ownership Structure

  • Dispersed Ownership Structure

    • Manager control

    • Earnings management (Enron, WorldCom)

    • Protection of minority shareholders

  • Concentrated Ownership Structure

    • Controlling shareholders

    • Appropriation of private benefits of control (Parmalat)

    • Concerns for creditors


China concentrated ownership controlling insiders m or bod

China: Concentrated Ownership + Controlling Insiders (M or BOD)

Controlling

Shareholder

Minority

Shareholders

Board of

Directors

Shareholder’s

Meeting

Board of

Supervisors

Manager


China s experience 1

China’s Experience 1:

  • Board of Supervisors监事会

  • To check the financial affairs of the company

    To monitor the Board of Directors and Managers

    To convene or propose the S/H Meeting

    To get involved in the S/H derivative suit

    ……

  • Relationship between Board of Directors and Board of Supervisors


Corporate governance in china some experiences and lessons

  • Chinese Corporate Governance (in practice)

Shareholder’s meeting

Board of Directors

Board of

supervisors

managers


China s experience 2 independent director

China’s Experience 2: Independent Director 独立董事

  • Problems of Corporate Governance in China:

  • State owned majority shares in many listed companies.

    • the representatives of state have not been monitored carefully (insider control)

  • Private companies: controlling shareholders exploit small shareholders (dominative shareholders)

  • Results for many listed companies: local governments /their representatives or private large controlling S/Hs take advantage of the small shareholders dispersed in the whole country, as well as the nationwide banks as the major creditors.

    • But, Market Won Gree 格力 (Electric Appliances) Board Bid (May 25th, 2012)

      • Mighty & Entrenched Management?


Independent director in china

Independent Director in China

  • Statute of Independent Director is in the legislative process by state Council (required by CL Art.123).

  • Guidance Opinion on the Establishment of an Independent Director System in Listed Companies, by China Securities Regulatory Commission (2001, CSRC).

  • The end is to make independent directors become the “supervisor” on behalf of the CSRC?

    -- Donald C. Clarke, The Independent Director in Chinese Corporate Governance, 31 Del. J. Corp. L. 125 (2006).


Corporate governance in china some experiences and lessons

  • Chinese Corporate Governance (current)

Shareholder’s meeting

Board of Directors

(Independent D)

Board of

supervisors

(Independent S)

managers


Independent directors in a dilemma

Capacity & Experience

Restraints

Information Asymmetry

Relationship

Incentives ?

Interest Group or Privilege?

Listed Com.:2314

ID position: 7595

ID: 5593; 1: 1.36

(end of 2011)

Obligation ↗

Liabilities ↗

Shortage of independent director candidates, especially for the small and risky listed companies on the ChiNext

Professors & Researchers (40%)

Lawyers & Accountants

Retired government officials

Independent Directorsin a dilemma


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