Chinese companies still have a long way to go in corporate governance, according to Chinese and foreign economists here Tuesday.
Attending the three-day Fortune Global Forum 2005 that opened here Sunday, Fang Xinghai, deputy general manager of Shanghai Stock Exchange, said companies in Shanghai has made great progress in the past few years, especially in the aspect of corporate governance. In Shanghai listed companies, one third of directors have become independent directors, and they have produced a large impact.
However, he said, it is not "suitable" to apply the rules of OECD to Chinese companies. Though Chinese companies need high standard corporate governance, some Chinese still do not know clearly what "corporate governance" means.
According to the modern economics, corporate governance refers to the summation of the systems of a company, using current legal and economic means to realize internal control and profits in the circumstances that the ownership and the power of control are separated.
Peter Peterson, chairman of the Blackstone Group, a US firm running private capitals, said corporate governance has just started for Chinese market. China's growth rate reached nine to ten percent while its capital market was at a low level. What's more, most of the Chinese like saving. That showed the Chinese people did not have confidence in the stock market. In China, there are a lot of companies based on families, which usually have complex structures, he acknowledged.
China also has large amount of state-owned companies and Asian companies usually pay attention to achieving social profit as well as profits of shareholders, he said. So it is very important to talk about corporate governance in China.
Fang said most of Chinese managers do not hold shares and are not members of board of directors. "This is a very serious problem, which has to be solved."
The state holds too much of shares, he said.
Fang suggested the only way to solve the problem is that managers should hold shares, even tradable shares, to bond themselves with the profits of companies.
While Jiang Jianqing, chairman and president of Industrial and Commercial Bank of China, said corporate governance itself is a process of development in China.
To the problems that only Chinese companies face, such a shaving no board of directors at all, Chinese companies must take them as the most important problems and have to solve them, Jiang said.
The progress made by Chinese companies has also been recognized. David Eldon, chairman of HSBC Asia Pacific, said most of the good Chinese companies select Hong Kong or overseas place to be listed. So they must issue reports to public investors, which makes their corporate governance improve.
Jiang said many statistics show that by being listed or organizing joint-stock companies, Chinese companies pay increasing attention to realizing the maximum profits of shareholders.
(Xinhua News Agency May 18, 2005)
