Corporate lease from Mainland China. That lease ended

Corporate governance refers to the system of rules, practices and processes by which the management of a company is directed and controlled to maximize the profitability and long-term value of the firm for shareholders while taking into account the interests of other legitimate stakeholders.  Corporate governance essentially involves balancing the interests of a company’s many stakeholders, such asshareholders, management levels, customers, suppliers, financiers, governmentand the social community.

 Compare and Contrast Hong Kong and ChinaAlthough Hong Kong is a part of China, the governance of the companythere reflects quite different.  Since the mid-nineteenth century, HongKong had been a British Protectorate under a lease from Mainland China. That lease ended in 1997 and Britain transferred the rights over HongKong to China, which deemed it a Special Administrative Region of China(HKSAR).

 Since Hong Kong under the British influence, its developed the ownlegislature, an independent judiciary based on UK common law, and the Hong Kongcurrency are linked to the United State.  The Hong Kong Stock Exchangebegan life in 1891, and now oversees the Hong Kong Corporate Governance Code. Institutions for company registration and regulation were created, and strongprofessions were formed – legal, auditing, accounting, finance, and companysecretarial.Compare with China, Hong Kong’s corporate governance systems are far exceeds.  Since Hong Kong has a combination of efficient capital markets, established legal system, well-organized banking sector and higher standards of accounting and auditing system that means the investor in Hong Kong are better protected than China.

For China, the model of corporate governance is mostly transitionaleconomies model and Hong Kong are mostly family-controlled model.  Comparewith Hong Kong, China are underdeveloped corporate control market and lack ofinstitutional investors.  According to China’s Company Law which isenacted in 1994 and revised in 2006, the ownership structure at company levelin Mainland China are one-share, one-vote standard and most company only issueordinary shares.  And two types of company were created. One is a “Limitedliability company” (LLC) with at least two and cannot carry more than fiftyshareholders. Another one is “Company limited by shares “.

Best services for writing your paper according to Trustpilot

Premium Partner
From $18.00 per page
4,8 / 5
4,80
Writers Experience
4,80
Delivery
4,90
Support
4,70
Price
Recommended Service
From $13.90 per page
4,6 / 5
4,70
Writers Experience
4,70
Delivery
4,60
Support
4,60
Price
From $20.00 per page
4,5 / 5
4,80
Writers Experience
4,50
Delivery
4,40
Support
4,10
Price
* All Partners were chosen among 50+ writing services by our Customer Satisfaction Team

 Theownership structure of China are very concentrated to the main stakeholder orits only single majority shareholder. Sometimes the CEO and chairman are notseparated so it will easily cause inside dealing because lack of transparency. The shareholding situation in China is revealed in all firms withoutspecifically presenting in a separate section where company describes allshareholders in categories such as individuals, non-financial enterprises, non-bankingfinancial institutions, government, foreign investors, ordinary staffs andexecutives and others, as breakdown of shareholdings is not disclosed in allfirms.On the contrary, Hong Kong companies only issue ordinary shares in Hong Kong Stock Exchange.  Most of the companies in Hong Kong are in Family-Based and individual ownership structure, the board of director is also controlled by the family.  The management and ownership is combined in Hong Kong.

 The company is not legally required to have the minimum number of non-executive director on independent non-executive directors.  The Company Ordinance (CO) also adopts different board structure limitation in Hong Kong.  The rules require every company on the list must have at least three independent non-executive director, one of them must certificated appropriate professional qualification on financial management or accounting. For the private company, CO require at least one director.  That the difference between China and Hong Kong. China’s company structure board are not much strictly than Hong Kong that cause China easily happen corruption situation.  According to this ownership structure, Hong Kong needs to set more limitation regarding director and executive shareholding is because of significant difference on ownership structure between two regions.China’s corporate governance rules were deeply inspired by Western experience, including the company structure, the limitation etc.

That means between China and Hong Kong, there were some rules are similar.  Both listed companies in Hong Kong and China are expected to set up the audit committee, subject to shareholder approval and protect the benefit for shareholders.  The Audit committee member need to be the director, and independent directors should form a majority of its members.  At least one independent director of each audit committee should have relevant accounting qualifications. Also, both Hong Kong and China should disclose the information that has substantial impact on shareholders and stakeholders in fair, accurate, complete and timely manner in accordance with laws, regulations and their own articles of association.  The company should also guarantee all shareholders have equal right of access the information.

Listed companies should found mechanisms for disclosing information, handling the request, answering public inquiries, and connecting with shareholders and community. Benefit for Economic AspectGood corporate governance not onlycan enhance the company’s image and reputation, but also produces the directeconomic benefits by making the company more profitable and competitive. According to the IFC publication, there were the guide to practice goodcorporate governance and experiences from the Latin American Companies Circle. The guides concentrate on 14 Latin American firms that are the members ofthese company circle and launched in 2005 which provide to the private sectorand show the member companies how to commit the good corporate governancepractices and share their experience to community.

 The guide show usimproved corporate governance can help the company access the capital or reducethe cost of capital.  Besides, how to face and respond to the externalmarket pressures, to balance the shareholder interests, to resolve governanceissues in family-based business, to ensure company sustainability also toachieve better operational results.  These economic benefit are real andmeasurable.  Companies Circle members also pay more dividends, which canhelp company to attract additional investors, and have better access to creditat a lower cost.  Those result shows good corporate governance can ensuresthe corporate success and their economic growth such as higher transparencywhich can ensures strong and balanced economic development. This alsoguarantees shareholders’ interests.

 It ensures that all shareholdersfully exercise their rights and the company