Why Corporate Governance is So Important to China

by Eric Jackson for Forbes, July 6th, 2011.

Ask most what is the biggest economic risk facing China today and you will probably hear about food inflation, property prices, or growing imbalances between the rich and working class in society.

Those are all worthy challenges, which the Chinese government has been acutely focused on in the last year.  They just raised interest rates another quarter point this morning to deal with inflation.

However, there’s an area which has been getting much less attention, yet which could be more dangerous to China: problematic or lax corporate governance.

Corporate governance has to do with how organizations are run.  Organizations with proper corporate governance have accountability and transparency.  People in authority at those organizations know that their actions will be seen and judged by others.  Therefore, those leaders are more likely to act in ways that benefit the organization’s stakeholders.  They are also less inclined to act in ways that benefit themselves personally at the expense of the organization. (continue reading… )

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