Question

Discuss any significant cultural and corporate governance differences between the United States and the countries that the majority of the positive global diversification activities occurred

counyries like china,japan and brazil

Answer 1

Significant cultural and corporate governance differences between the United States and China

Globalization of business due to market expansion to other foreign countries has bound them to have healthy relationship among them. United States and China are two big players in world business. Their relationship is as old as barter system was in place. Now let us understand the corporate governance. Corporate governance is set of rules in a corporate by which, company’s relationship with its stakeholders (liked share holders, customers, financers, government, management etc) is controlled and measured and accountability is established.

History of Corporate governance in United States and China can be seen as follows.

China is aligning towards international economy and rapidly moving towards growth of private enterprises and capitalism. China has focused more on western countries and expanded its business and strategy to make modern enterprises. They have amended their corporate law to suit with international market and ensured the fair practice and preventing the illegal activities such as insider trading. They are also established China security Regulatory Commission and published code of conduct for corporate governance for listed companies and securities market.

On the other hand, United States has a history of developing Corporate Governance in stages. In 1901-1939, there were reforms to regulate, control and maintain the corporates. They established the Anti-trust law and most of the power was given to Board against shareholders. The Security Act of 1933 and The Security Exchange Act of 1934 asked the corporates to disclose their financial status and situation and details of investors. There were more developments in corporate governance in Unites States like anti-takeover tactics, responsibility of directors and management towards shareholders, rights to investors to monitor and determine the Board. Currently, the corporate governance of Unites States is controlled by SOX Act 2002. Their focus is mainly on independence, transparency and disclosure and accountability. The New York Stock Exchange and NASDAQ are also controlled by SOX with outlined regulations.

Point of differences between two countries regarding corporate governance.

US corporates have 1 tier Board of directors where as China have 2 tier Board. 1 Tier Board of directors is standard board of directors who oversees the management of the company. In 2 tier Board, one is standard Board with standard activities another is a supervisory committee set by law to supervise the activities of standard Board.

In China, ownership is concentrated that gives the shareholder undue advantage to exercise rights and take decision whereas in United States, the ownership is diluted and few shareholders cannot take decisions or exercise the rights.

In Unites States, all the corporates are required to disclose the statements starting from registration and periodic statement to their shareholders and these reports are filed with SEC. These includes annual report, quarterly reports, current report and proxy statements. In China, the CSRC code requires the listed corporates to disclose the information as an on going activity. The listed corporates are also required to disclose any information which have a material effect on the decision of the shareholders. The major information are – corporate governance, composition of Board, composition of supervisory board, attendance record, establishment of any committee or subcommittee and their operating details, party transactions, appointment of executive or removal.

In United States, government doesn’t intervene with corporate activities compare to China. 70% of US corporates are publically owned whereas in China, 50% are owned by the Government

Conclusion: US and China are two major business house in the world but there is huge difference in corporate governance in these two countries. The ownership of Chinese corporates are more concentrated compare to US corporates. There is different structure of Board in these two countries. Though, differences are there with regard to corporate governance, both the countries maintain a healthy relationship based on respect and mutual understanding.

Reference

Beller, R. (2010). Whistleblower Protection Legislation of the East and West: Can It Really Reduce Corporate Fraud and Improve Corporate Governance-A Study of the Successes and Failures of Whistleblower Protection Legislation in the US and China. NYUJL & Bus., 7, 873.