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  • Group 8 - Corporate Governance of China

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    1) China transitioned from a planned economy to a market-oriented one, but its control-based corporate governance model built weaknesses. 2) Regulators like the China Securities Regulatory Commission establish stock market guidelines and policies, while other bodies also oversee corporate governance. 3) Audit committees comprised mostly of independent directors oversee financial reporting and internal controls. 4) Management compensation is linked to performance but remains low compared to Western standards. 5) Problems include concentrated state ownership and lack of board independence, while reforms aim to increase accountability and reduce political influence.

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    Group 8_Corporate Governance of China

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    1) China transitioned from a planned economy to a market-oriented one, but its control-based corporate governance model built weaknesses. 2) Regulators like the China Securities Regulatory Commission establish stock market guidelines and policies, while other bodies also oversee corporate governance. 3) Audit committees comprised mostly of independent directors oversee financial reporting and internal controls. 4) Management compensation is linked to performance but remains low compared to Western standards. 5) Problems include concentrated state ownership and lack of board independence, while reforms aim to increase accountability and reduce political influence.

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    Attribution Non-Commercial (BY-NC)
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    33 views15 pages

    Group 8 - Corporate Governance of China

    Uploaded by

    almalik_rajpari
    1) China transitioned from a planned economy to a market-oriented one, but its control-based corporate governance model built weaknesses. 2) Regulators like the China Securities Regulatory Commission establish stock market guidelines and policies, while other bodies also oversee corporate governance. 3) Audit committees comprised mostly of independent directors oversee financial reporting and internal controls. 4) Management compensation is linked to performance but remains low compared to Western standards. 5) Problems include concentrated state ownership and lack of board independence, while reforms aim to increase accountability and reduce political influence.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    of 15

    Corporate Governance of China ()

    Team Members: Almalik Rajpari Amala Shah Monali Chhabda Misba Shah Sabrina Shroff Tanveer Khan
    5/4/2012

    Chinas stock market is worse than a casino. At least in a casino there are rules
    Wu Jinglian, a famous Chinese economist, 2001

    5/4/2012

    Introduction
    Transition from a planned economy to a market

    oriented economy Control based model Built-in weaknesses Control-based model to market-oriented governance model Objective of Chinese stock market: Platform to State Owned Enterprises

    5/4/2012

    Regulatory Side of CG
    The China Securities Regulatory

    Commission (CSRC) Responsibility of studying and establishing guidelines and policies for future market and security market Other corporate governance regulatory bodies include: the National People's Congress, the State Council, the Ministry of Finance, the People's Bank of China, Shanghai Stock Exchange and Shenzhen 5/4/2012 Stock Exchange

    Audits/Control System
    Audit committee comprises of:

    - Members from the companies Board of Directors


    - Independent directors should account for the

    majority of the committees members - Each audit committee should contain at least one independent director with relevant professional qualification in accounting

    5/4/2012

    The work of the Audit Committee


    According to the Code of Corporate Governance for Listed Companies, audit committee are responsible for the following activities (1) Proposing to hire or replace the external auditor (2) Monitoring the company's internal audit policies and their implementation (3) Coordinating communication between internal and external auditors (4) Reviewing the company's financial information and disclosure (5) Reviewing the company's internal control policies
    5/4/2012

    Remuneration of Management
    Linked to firms performance & Individual

    performance Underpaid compared to western standards Top Executives: Fixed Salary + Bonus Most Executives including directors and senior managers get paid $6,250 p.a. Top 3 executives: $12,000 p.a. Benefits for executive directors: car and housing subsidy Independent directors: $6,250 + allowances Disclose details of remuneration in Annual Shareholder Meeting
    5/4/2012

    Non-executive directors hold the most shares


    Independent directors hold the least on average Senior managers tend mainly to hold employee

    shares issued to them when the company was listed

    5/4/2012

    Governance of the Board


    It does the financial supervision for the company

    It lacks skills and experience


    Channels of information: Management Board &

    senior Management Lack of Information for making decisions

    5/4/2012

    5/4/2012

    Composition of the Board


    It is a twotier control system comprised of the

    Board Of Directors and the Board Of Supervisors Chinese company law stipulates Board of Directors should total between 5 and 15 in a listed company

    5/4/2012

    Disclosure
    Disclosure should include, but not be limited to, material information on: 1. The financial and operating results of the company 2. Company objectives 3. Major share ownership and voting rights 4. Remuneration policy 5. Related party transactions 6. Foreseeable risk factors 7. Issues regarding employees and other stakeholders 8. Governance structures and policies

    5/4/2012

    Problems of Corporate Governance in China


    Concentration of state ownership Lack of independence among board directors Insider trading False financial disclosures Immature capital markets

    5/4/2012

    Conclusion
    If I were the only one who lost money, I would blame my poor IQ or wrong decisions; But now everyone has lost money, so its a problem with the market. a Chinese investor Investors confidence level drops Reform SOEs likely to increase accountability Reduced political influence Non tradable state shares to tradable shares Overall China is made significant progress in maintaining the corporate governance
    5/4/2012

    Thank you!

    5/4/2012

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