One of the positive things China expects from the introduction of foreign investment (and the use of overseas listings) is improved corporate governance. However, this requires a big change in the way that Chinese companies operate, as they have often been driven by dictat – with the big boss (and the Party Committee) being all-powerful.
However, the Sunday Times reports that state firms are now starting to give directors more power, and are using the experience of foreign experts to help the process along (see more on the use of senior foreign managers here). The report notes the example of Zhang Chunjiang, Chairman of China Netcom Group (listed in New York and Hong Kong), who recently had his first experience of directorial dissent - from a foreign director, John Thornton (previously President of Goldman Sachs):
“’This was the first time I had ever encountered opposition’,” said Zhang, a 48-year-old former government vice minister. “’But we had made a real mistake’.” He scrapped his selection [of a financial advisor] and let the committee decide”.
One of the problems foreign executives face in China is that most boards at state companies lack real power, as they are controlled by the Party Committees that operate in the background. However progress is being made and:
Archive » Corporate Governance and a Party (Committee) in the Boardroom| China Business Blog
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