group 8_corporate governance of china
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Corporate Governance of China()
Team Members:
Almalik Rajpari
Amala Shah
Monali ChhabdaMisba Shah
Sabrina Shroff
Tanveer Khan5/4/2012
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Chinas stock market is worse than a casino. At least in a
casino there are rules
Wu Jinglian, a famous
Chinese economist, 2001
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Introduction Transition from a planned economy to a market-
oriented economy
Control based model
Built-in weaknesses Control-based model to market-oriented
governance model
Objective of Chinese stock market: Platform to
State Owned Enterprises
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Regulatory Side of CG
The China Securities RegulatoryCommission (CSRC)
Responsibility of studying and establishing
guidelines and policies for future marketand security market
Other corporate governance regulatory
bodies include: the National People'sCongress, the State Council, the Ministryof Finance, the People's Bank of China,Shanghai Stock Exchange and Shenzhen
Stock Exchange 5/4/2012
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Audits/Control System Audit committee comprises of:
- Members from the companies Board of Directors
- Independent directors should account for the
majority of the committees members- Each audit committee should contain at least one
independent director with relevant professionalqualification in accounting
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The work of the Audit Committee
According to the Code of Corporate Governance forListed Companies, audit committee areresponsible for the following activities
(1) Proposing to hire or replace the external auditor
(2) Monitoring the company's internal audit policiesand their implementation
(3) Coordinating communication between internaland external auditors
(4) Reviewing the company's financial informationand disclosure
(5) Reviewing the company's internal controlpolicies
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Remuneration of Management Linked to firms performance & Individual
performance
Underpaid compared to western standards
Top Executives: Fixed Salary + Bonus
Most Executives including directors and seniormanagers get paid $6,250 p.a.
Top 3 executives: $12,000 p.a.
Benefits for executive directors: car and housing
subsidy Independent directors: $6,250 + allowances
Disclose details of remuneration in AnnualShareholder Meeting
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Non-executive directors hold the most shares
Independent directors hold the least on average
Senior managers tend mainly to hold employeeshares issued to them when the company was listed
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Governance of the Board It does the financial supervision for the company
It lacks skills and experience
Channels of information: Management Board &
senior Management Lack of Information for making decisions
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Composition of the Board It is a two
tier control system comprised of the
Board Of Directors and the Board Of Supervisors
Chinese company law stipulates Board ofDirectors should total between 5 and 15 in alisted company
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Disclosure
Disclosure should include, but not be limited to,material information on:
1. The financial and operating results of thecompany
2. Company objectives3. Major share ownership and voting rights
4. Remuneration policy
5. Related party transactions
6. Foreseeable risk factors
7. Issues regarding employees and otherstakeholders
8. Governance structures and policies5/4/2012
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Problems of Corporate
Governance in China
Concentration of state ownership
Lack of independence among board directors
Insider trading
False financial disclosures
Immature capital markets
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Conclusion
If I were the only one who lost money, I would blamemy poor IQ or wrong decisions; But now everyonehas lost money, so its a problem with the market.
a Chinese investor
Investors confidence level drops
Reform SOEs likely to increase accountability
Reduced political influence
Non tradable state shares to tradable shares Overall China is made significant progress in
maintaining the corporate governance
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Thank you!
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