Empirical Insights into Supervisory Boards of Listed Companies in China

Abstract

This paper addresses a gap in the literature by presenting novel empirical insight, accorded by privileged access to prejudications and legal decisions, into corporate governance in China. A main aim of our work was to assess whether calls for reform of the regulatory system are warranted. We present an inductive piece of research into two-tier boards in Chinese listed companies, incorporating a board of directors and a supervisory board, appointed by and reporting to the shareholders’ meeting. Through unique primary-source evidence, and additional evidence from recent legal cases, we illustrate the problems faced by organizations that have had to contend with the inherent difficulties of corporate governance in China. Our findings suggest that the supervisory board, in practice, has limited power, given the conflicting roles of the various members, and that corporate governance might be better maintained by a greater transfer of power to independent directors.