Will Chinese Legal Culture Constrain its Corporate Governance-Related Laws?

Abstract

There are a wide variety of social, economic, political and cultural variables that may influence the corporate governance regime, of which culture has been observed as “the mother of all path dependencies”. There are substantial differences in legal ideologies and cultural attitudes towards law across jurisdictions. Corporate governance laws relate interactively to China's prevailing culture. A unique set of cultural values might affect, in a chain of causality, the development of China's laws in general and its governance system in particular. On the one hand, culture serves to motivate and justify actions which are compatible with its values through its impact on organisational policies and on the values of individual decision-makers. On the other hand, the existing corporate governance laws and civil procedures reflect culture orientations for particular forms of conflict resolutions. Under the current global financial crisis, it would make great sense to examine some of the most significant controversial issues that are inherently embedded in the Chinese cultural settings. The corporate governance-related laws should arguably be compatible with the degree to which the national culture tolerates confrontational processes. By analysing the cultural attitude toward the corporate executive behaviour and the extent of tolerance of interested-party transactions, this paper aims to explore an efficient litigation-based enforcement regime on the basis of cultural values justifying actions and evaluations.