Corporate Governance Gaining Ground in China

As China’s resources companies expand overseas, corporate governance will become a more pressing consideration according to research presented in a new publication: Corporate Governance and Resource Security in China—The Transformation of China’s Global Resources Companies authored by responsible investment specialist, Dr Xinting Jia and Professor Roman Tomasic, Chair of Company Law at Durham University in the UK.

The research explores corporate governance practices in listed resources companies in China and how their practices compare to international resources giants. It also puts into context the regulatory environment of large resources companies in China and examines transparency and ownership issues. While the main themes relate to corporate governance, the research also covers wider contemporary issues of resource security and environmental change, which are closely related to the depletion of the world’s natural resources.

Jia commented, “China’s resources companies are becoming increasingly active players in global resources markets. As such, it is critical that they take Environmental, Social and Governance (ESG) issues into consideration in their management practices.” She added, “In addition, our research highlights the unique role the Chinese government plays in listed companies, the majority of which have the government as their major shareholder. However, in some cases we found that minority shareholder rights may not be properly protected and transactions between the major shareholders and the listed entities can be problematic.”

Helga Birgden, Asia Pacific Head of Responsible Investment with Mercer’s investment consulting business, remarked that the research findings are consistent with Mercer’s responsible investment study on China as part of the International Finance Corporation, World Bank report, suggesting ESG issues have growing importance in major emerging markets. Birgden added, “Evidence is mounting to show that good corporate governance and management of ESG factors can contribute to growing sustainable economies. This research may encourage China’s long-term view while improving market confidence for foreign investors in China.”