Chinese Corporate Governance
The Anglo-Saxon model of corporate governance, granting total supremacy to shareholder interests, still dominates most free market economies. Through charitable (ie tax allowable) think tank propaganda and lobbying, shareholder supremacy is continuing to make progress where it is not already total, such as in Germany and Japan. In those countries there is great pressure to conform to the Anglo-Saxon model. It is the Western orthodoxy, what Galbraith referred to as an institutional truth, that is a lie that has to be bought into in order for one’s career to prosper. With such universal acceptance, the time is surely not far off for its collapse.
China’s position is particularly interesting. Its industrial progress over the last decades was surely initiated through the exploitation of cheap labour as well as the opening up to new markets. Its sovereign funds, which support the failing western economies, especially the U.S., were amassed on the backs of that cheap labour. Now it seems that labour is beginning to realise its strength and start to make demands for a more just distribution of the benefits they generate. China seems unlikely to avoid the age old struggle between the providers of capital and the providers of labour.
That struggle can only be intensified when one party becomes too dominant. Given the opportunity and a philosophical justification, the strong will seek to exploit the weak. The justification is provided by economic theory which argues that the greatest economic progress is achieved through the unrestrained activity of self-interest maximising competitors. The opportunity may be provided by China adopting the Anglo-Saxon model of governance.
The Chinese labour versus capital conflict might be somewhat moderated, as the Japanese have through a mixture of culture and tradition, or as Germany has, through the adoption of shared rights and responsibilities with two tier boards giving employees voting rights on critical issues. Either is a possibility. But the risk is that the Chinese may be about to start living in what Confucius referred to as interesting times. And that will likely include everyone else with them.