Regulation of Business Organizations in a Socialist Market Economy
Chapter 6: The general corporate governance and management structure
Corporate governance has become a highly fashionable topic in China since the outset of the twenty-first century, when a listed company, popularly known as YinGuangXia, was disclosed by the media to have committed a RMB745 million fraud through massive fabrication of sales receipts and false disclosures perpetrated by a few 'core' insiders. This case caused losses to thousands of minority shareholders and is considered one of the biggest corporate scandals in recent decades of PRC history. It revealed some fundamental weaknesses in the management, regulation, and supervision of the country's enterprises. As a Standard & Poor's report noted, '[c]orporate governance since then has been placed at the very top of the government's agenda', and 'the mandate to improve corporate governance is a top priority amongst all sectors, including government bodies, regulators, intermediaries, corporations, and investors'. In the following years, various government agencies issued numerous laws and normative documents to standardize the corporate governance practice of Chinese enterprises. As a general note, several 'Chinese characteristics' of corporate governance will be pointed out. First, China has set up a hybrid system of corporate governance institutions, borrowed from both the Anglo-American model and Germanic-Japanese model. In terms of internal governance, the typical organizational structure of a company comprises three tiers of control, namely the shareholder's meeting, the board of directors, and the supervisory board. In addition, a JSLC is legally required to have a management team.
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