Between Bureaucracy and Market: Chinese Industrial Groups in Search of New Forms of Corporate Governance

Abstract

International audienceThis paper investigates the peculiar and contradictory nature of the on-going constructionof a system of corporate governance in China. The analysis attempts to overcome the limits oftraditional corporate studies that tend to focus on enterprise management, and puts the issuewithin the framework of the systemic and political relationships that shape economicmanagement and state intervention in large enterprises in transitional socialist systems. Theemergence of a specific managerial culture within the market and of winners among theenterprises is related to the position still held by the state in the enterprise asset, and by the accessto competitive markets available to the enterprises. State owned enterprises, enjoy the protectionof their status but they are more successful and adopt a more profit-oriented management cultureif they operate in the internationalised and competitive markets rather than in the strategical lowprofit,state-dominated sectors. Due to continuous interaction between enterprise managementand external (policy or macro-economic) factors, and to the absence or underdevelopment ofmost of the institutions generally necessary for a sound corporate governance system (financialmarkets, bank independence, free press etc.) the privatisation does not seem sufficient toengender all round market-led governance

Interorganizational Exchanges in China: Organizational Forms and Governance Mechanisms

“…First, they have dissimilar resources and institutional (dis)advantages, which determine the bargaining position of each type (Nee, 1992). Second, ownership shapes governance structure, which allows different levels of managerial discretion and latitude for manoeuvring (Huchet & Richet, 2002). In other words, agency problems vary both qualitatively and quantitatively across organizational forms.…”

“…Due to their strategic position in the national economy and objectives besides profit‐maximization, such as keeping prices and supplies steady, SOEs receive much support from the central and local governments as well as from government‐controlled banks (Clarke, 2003; Wu & Li, 2006). These resource advantages, combined with their ownership and serious agency problems (discussed below), create many problems such as waste and misuse of resources (Huchet & Richet, 2002), endemic corruption, and the stripping of state assets (Kwong, 1997). These problems hinder SOEs from using resource and institutional advantages in pursuing their organizational interests.…”

Globalizing Partially Privatized Firms in Singapore: The Role of Government as a Regulator and a Shareholder

“…Although sector-specific SOE supervisory agencies (such as the Guangdong Kelon Holding Company) managed the corporatized SOEs, they did not have the legal power to play the role of an active shareholder. The power to influence governance matters of the SOEs was subject to their negotiation with the bureaucracies of the central ministries (Hutchet and Richet, 2002). The problem emerges when the asset management companies act in the interest of the state to meet non-economic objectives rather than focusing on raising the profits and efficiency of the firms.…”

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