way economic activities are conducted in thefledging market-oriented business regime.While facets of modern market institutionsand instruments have now been adopted exten-sively from mature market economies, they haveto operate under an environment where thesocial and economic preconditions for their effective functioning are at times lacking or underdeveloped.
This may be an inevitableconsequence of China’s gradual approach toeconomic reform, but the asymmetrical progresshas also paved the ground for the emergence of a variety of issues in business ethics. Corruption,stock market manipulation, tax cheating, fraud-ulent dealings, all manners of plundering of stateassets and the lack of shareholders’ rights aresome of the more conspicuous manifestations. Inmany ways, nowhere are such new ethical issuesbrought into sharper focus than in the develop-ment of corporate governance in China’s listedcompanies, the country’s supposedly mostmodern and market-oriented business organiza-tions. This study will examine the key corpo-rate governance and ethics issues associated withthis type of companies. Similar problems willcertainly be faced by participants in other areasof the country’s transforming social-economiclandscape.As a result of the more rapid pace of corpo-ratization and
privatization of state ownedenterprises since the early 1990s, corporategovernance has assumed an increasing promi-nence in the country’s reform agenda as theChinese government tried to promote enterpriseperformance and to look after its ownershipstakes in various forms. The widespread andpersistent financial distress experienced by manystate owned enterprises has added to the urgencyof getting the country’s corporate governanceright.This article shows that the business ethicsissues associated with China’s corporate gover-nance arrangements are the product of severalinteracting factors. They stem firstly from thestruggle between the desire to install “modern”institutions and instruments, and the imbalancedprogress in the development of complementarysocial, political, legal and economic infrastruc-tures. Another equally important factor can beattributed to the approach taken by the Chinesegovernment to establish a corporate governancesystem based on the stylized Anglo-Americanmodel. In investigating the key ethical issues inthe context of China’s corporate governancedevelopment, the paper aims to examine howthey can be realistically addressed to producemore desirable outcomes.This paper is organized as follows.
examines what corporate governance develop-ment in China is about and its salient featuresand major trends. It will briefly outline the recenthistory of the creation of corporations andinvestigates the meaning of corporate governanceand its relevance for China’s reform and devel-opment.
identifies and explains theemerging ethical issues in the context of thecountry’s evolving macro environment as well asits corporate governance arrangements.
discusses the government’s policy responses toresolving such issues and evaluates their effec-tiveness. Some conclusions are also provided.
2. Challenges of corporate governanceII.development
Introduction – the birth of companies and
Optimizing allocative efficiency and distribu-tional equity, and the way these two goals maybe balanced are always basic issues of economicpolicy in any country. In China’s economicreform, the government has certainly tackledthese issues in a fundamental way but has alsopersisted with a desire to preserve its perceivedessential trait of socialism by means of main-taining the prominence state ownership in keysectors of the economy. This state ownershipstricture has complicated economic policymaking and its outcomes. Many have argued thatit has hurt the effectiveness and pace of thecountry’s economic reform.
In reality, however, the ownership mix hascontinued to shift towards a diminishing statesector. The rising degree of marketisation andopenness in the economy, and the need to dealwith many financially distressed SOEs have304
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