Title: The Power Structure in China's Listed Companies: The Company Law and its Enforecement
Reference Number: 1039
Publication Date: January 2002
JEL Classifcation:
Author(s):

Sonja Opper
Tübingen University

Sonia Wong
The University of Hong Kong

Ruyin Hu
Shanghai Stock Exchange

Abstract:

The implementation of China's Company Law in 1994 has been regarded as a major tool in the corporatization of China's enterprises and establishment of a new power structure modeled on modern corporations in market economies. The law attempts to transfer decision-making power from the old party/state organizations to standard organizational bodies of modern corporations. Several observers have already claimed that the power transfer has not been complete in corporatized enterprises, but astonishingly, there have been no attempts to empirically measure the de facto enforcement of the Law and reveal the prevailing pattern of enterprise power structure. Based on a unique survey of the corporate governance structure of 248 companies listed at the Shanghai Stock Exchange, our paper seeks to bridge the gap by approaching the issue with a dual focus; first of all, we seek to reveal whether the current power distribution in China's listed companies is actually consistent with the formal rules of the Company Law. Secondly, we highlight the role of the local party units in the evolving power structure of the companies. The paper offers a preliminary evaluation of the enforcement of the Company Law and the degree of de facto enterprise de-politicization. The results will be particularly helpful to broaden understanding of the forces and dynamics of institutional and organizational changes in China's transitional economy.

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Key words: China, company law, depoliticization, enterprise reform, law enforcement

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Last modified: 07/25/2002