China Law Blog

The Institutional Shareholder Services 2006 Global Investor Study was just published and it includes a special report on China, entitled, "China -- The Next Corporate Governance Hotspot."  According to the ISS, this study "reflects the collective voice of the institutional investor worldwide and is unprecedented in scale and scope, with over 300 institutions across 18 countries participating." The International Corporate Governance Blog (which tipped me off to this study) notes that the report indicates "huge corporate governance risks" in China, stemming in large part from the "close relationships among issuers and governmental agencies through state-owned enterprises and closely linked ownership structures." 

According to the ISS, the study's key findings are as follows:

9 out of every 10 Chinese investors sees corporate governance as extremely or very important today

Chinese investors believe an increased focus on returns and risk management will drive future corporate governance importance

73% of Chinese investors listed executive pay for performance among their most desired corporate governance improvements

And 93% of Chinese investors listed better disclosure, transparency and reporting among most desired improvements

In a previous post, entitled, "Corporate Governance in China Improving Slowly," I discussed similar findings from the Institute of International Finance and I concluded as follows:

China's corporate culture is not yet generally imbued with a recognition of the importance of corporate transparency and China's laws are not yet strong enough to force it.    

Apparently, the ISS agrees.