Before engaging in discussions of the legality of corporate social responsibility (CSR) and related regulations and enforcement problems in China, it is worth paying attention to the existing corporate governance model in China and discussing the agency relationships within the actors of the company, namely, directors, shareholders and various stakeholders. The causality and dynamics between Chinese corporate governance practices and institutional constraints from various sources should be discussed in order to gain a deeper understanding of ëwhat portfolio of governance mechanisms can be better adapted to Chinaís increasingly challenging institutional settings and generate the largest benign impactí. The involvement of the Chinese government in business raises a unique set of corporate governance issues, and makes the improvement of Chinese corporate governance difficult. Corporate governance in China has emerged and developed with the shift of the Chinese economy from a planned to a market economy. It has been argued that the development of Chinaís corporate governance has demonstrated a number of internal weaknesses which make the stock market less effective in controlling shareholders, protecting minority shareholders and stakeholders, and fostering long-term performance for businesses. It is problematic that the governance model gives unpoliced power and plenty of leeway to the controlling shareholders, expropriates the minority shareholders, and undermines the confidence of the public in the Chinese stock market. It is important to suggest some corporate governance reform measures that might help to establish a more effective business environment and promote CSR in China.
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