Quack Corporate Governance as Good Medicine – the Fruitful

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Quack Corporate Governance as Good Medicine – the Fruitful Incursion of Securities Regulation on
China’s Corporate Governance Regime
Nico Howson
Abstract:
At least since the passage of Sarbanes-Oxley (SOX), U.S. academic observers have lamented the
incursion of U.S. federal securities regulation into the realm of U.S. state corporate law and
governance. Since the very inception of its "corporatization" project in the 1980s and the creation of
public capital markets starting in the 1990s, the People's Republic of China (PRC) has seen the same kind
of incursions, only far more robustly than anything observed in the Americas, Europe or developed Asian
economies. Indeed, it may be asserted that the wellspring of modern corporate governance in
contemporary China is the innovative rule-making and enforcement practice of the China Securities
Regulatory Commission (CSRC) and the Shanghai and Shenzhen stock exchanges, not the nation's
unitary corporate law or the national judiciary attempting to interpret or enforce those often deficient
"legal" norms. This paper will focus on the specifically Chinese phenomenon seen over the past two
decades, and analyze it as a fruitful and benign legal/regulatory "gap-filling" function in the corporate
governance sphere -- made necessary given the PRC's political economy, the participants in Chinese
capital markets, broader governance traditions, and the ongoing development of that nation's explicitly
"legal" institutions. That analysis will in turn give rise to certain negative implications about the design
and establishment of corporate governance structures in non-PRC jurisdictions, and the legal and
institutional difference existing there.
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