Differences of the Chinese Companies from Publicly-Traded US or UK Companies - Case Study Example

The Chinese companies are different from those of a publicly-traded US or UK company, as according to research made in 2005, corporate governance in Chinese companies was historically economically answerable to the government. That’s why these companies suffered from certain flaws, such as increased concentration of public firms and their impact; lack of transparency in most of the Chinese companies’ corporate mechanism; issues emerging from not allowing shareholders to use their rights; deficient and lack of transparency in disclosing financial accounting; not permitting enough freedom to the board of directors and sharing responsibility, and common deficiency of shareholders’ interests in the corporate governance ( Abrami et al. 3). 

Managers in the past had been answerable to both the government policy initiatives and the business aims. The government had been the major stakeholder, therefore, its claim to fulfil its objectives was relevant and reasonable. Powers were also implicit in a firm’s Communist Party Committee, for making decisions in specific fields of governance, such as strategic planning (Abrami et al. 2-3).

Change in the Chinese approach to managing listed companies happened later in 1990 in its attempt to practice globally agreed parameters of managing corporations. Thus, these differences existed till 1990 when the Chinese government started two stock exchanges in Shanghai and Shenzhen. These attempts were made to transform the procedures of corporate governance. Those companies, desiring to become listed companies were supposed to fulfil basic governance and securities law (Abrami et al. 2).
Procedures smoothened with the formulation of the Chinese Securities Regulatory Commission (CSRC), which observed the functioning of these two exchanges and released a list of solid regulations. The primary job of CSRC is to “supervise the behaviour of listed companies and their shareholders who are liable for relevant information disclosures in securities markets” (Abrami et al. 2).

In the past, there was no practice of disclosing financial information by state-owned corporations but with the establishment of CSRC, an effort was made to make the disclosing of financial information mandatory. All these initiatives were aimed at being competitive with other stock exchanges and the emerging need to follow global standards of corporate governance. Concurrently, trends for corporate culture are growing, inspiring more and more Chinese companies to become listed firms on the stock exchanges, to list company shares in Chinese stock exchanges and with globally operating US-based and UK-based stock exchanges. This is being encouraged and done to meet globally adhered corporate governance practices and parameters (Abrami et al. 2). Thus, economic changes have brought about steady changes in corporate ownership and management with the implementation of the 1993 Company Law and the 2006 Company Law.