Do Chinese Firms need to adopt the Anglo-American Model and Can they Essay

Do Chinese Firms need to adopt the Anglo-American Model and Can they adopt it - Essay Example With these elements in place, it becomes easier to state that the Anglo-American model would be successful and implemented rather flawlessly. However, Chinese state-owned firms complicate the process of adopting the Anglo-American model due to Communist influence in Board representation and the manifesto of Communist ideology that is directly opposite to the liberal business and social policies that are entrenched in the Anglo-American model. Government influence in business strategy development, alongside Communist influence at the highest levels of governance, complicate the process of adopting the Western governance model. All situations considered, there is ample research support that the Anglo-American model would be relevant in the privately-owned enterprises in China. The question as to whether it should be adopted is addressed based on the structure of the capital market in China, its securities market, and the nature of the relationship between firms in the country and the r ole of stakeholders as decision-makers in a variety of Chinese industries. Do Chinese firms need to adopt the Anglo-American Model and can they adopt it? Introduction The Anglo-American model of corporate governance is founded on several principles and ideologies. ... The second principle is protectionism, as a primary goal, of corporate constituencies, made up of shareholders, creditors and employees. The Anglo-American corporate governance model establishes the ethical expectations and legally-binding regulations to protect the rights of ownership. This is accomplished with legislation enacted by the Securities and Exchange Commission and other Congressional legalities that ensure the development of Standing Committees, such as in areas of auditing or compensation and nomination committees. The Chinese corporate governance model, both in state-owned and privately-owned institutions, is not completely dissimilar to the Anglo-American model, whereby legal expectations for duty of care over protecting the shareholder and other institutional investors are the primary goals of corporate leadership. This essay describes the comparative aspects of the Chinese versus the Anglo-American system of corporate governance, offering support for the ability of Chinese firms to adopt many of the principles associated with Anglo-American governance. There is ample evidence that Chinese firms can adopt the Anglo-American model due to a variety of national reforms that give more autonomy and control to businesses in the country. The Anglo-American Model The Anglo-American Model of corporate governance was adopted under the principles and ideologies of a capitalistic and free market economy. This type of system is a holistic economic system whereby methods of production, industry and trade maintain control by private business ownership where profitability for the corporation are primary objectives (Durlauf and Blume 2008). The free market economy is one where demand and supply are segregated from governmental control and authority, whereby