Corporate governance in Chinese state owned enterprises

The aim of this study is to discover the board effectiveness through an examination of insider board practices in Chinese State-Owned-Enterprises (SOEs). It is based on twenty one in depth interviews with company executive and non-executive directors and supervisors in three publicly listed companies. It involves the investigation of the variables of board structure, function, processes and effectiveness. Interpretive inquiry is conducted to ascertain whether board directors and supervisors understand the meaning of corporate governance in achieving board effectiveness and to what extent they comprehend their role in implementing the codes and principles of corporate governance in day-to-day business activities. The study assesses qualitative data gathered from the interviews using content analysis and presents a model with propositions for its testing in later research. The results show that the notion of corporate governance has been widely accepted by Chinese boards. Universal principles of corporate governance are applicable in Chinese SOEs but social context prevents companies from implementing effective governance systems. Relative to the assumptions of agency theory, institutional theory and resource dependency theory, the practical challenges associate with the board processes and dynamics are not well recognised both theoretically and practically. Although the boards enact formal structures required for corporate governance, the board members' real behaviour is often far from satisfactory in order to promote shareholder accountability. These findings suggest that it is essential to understand what constitutes a good corporate governance system from the perceptions of board practitioners. The results therefore contribute to theory by highlighting the significance of primary qualitative research upon key governance variables. Extant research focuses too narrowly upon formality and by-passes process related activities, emphasising that there is a disparity between the perceived and real effectiveness of boards. The study addresses the gap between research and practice by providing an opportunity to investigate invisible board behaviours and contributes academic research to the practices of corporate governance reform. Practically, the findings provide a diagnostic framework which would benefit all Chinese companies in making further improvements to corporate governance.