Discussion Topic re: Cynthia Cooper and Corporate Governance in China
January 30th, 2006
Last Friday a number of you attended WorldCom whistle-blower Cynthia Cooper’s lecture on ethics and corporate governance. Her discovery helped pass the 2002 Sarbanes-Oxley Act, which vastly enhanced the financial controls and oversight at publicly traded companies. This past Fall quarter several of you also took Professor Carr’s Legal and Regulatory Enviroment of Business course, where guest speaker and OCOB law professor Eddy Quijano also spoke at length on the topic of corporate governance.
Ironically, in 2001 China had its own Enron style corporate scandal. What does a Google search reveal as some of the corporate governance issues that China is currently grappling with? Moreover, in your view are international corporate goverance standards diverging, or, as Thomas Friedman argues in his book (”The World is Flat”) converging, and how/why? Discuss.
Entry Filed under: Pre-Departure, China
7 Comments Add your own
1. James Sun | January 31st, 2006 at 5:39 pm
In 2001, there was a huge stock scandal case in China. I am not familiar with the details, but from what I remember, two people raised over $650 million USD under the names of different companies, then used that money to manipulate stock market prices. What was important about this case was that it was the first time in China that the stock market prices were manipulated, and the government wasn’t adequately prepared to handle it at the time. Since then, the Securities Regulatory Commission in China has been more proactive in monitoring corporate fraud.
2. Elisabeth Suiter | January 31st, 2006 at 10:57 pm
I just thought I’d add this article that’s on CNN.com regarding some former bankers from the Bank of China and their attempt to take the money and run– to the U.S.!
Chinese bankers, wives indicted
From Justice Department Producer Terry Frieden
WASHINGTON (CNN) — Two former Chinese bankers and their wives have been indicted in Las Vegas in connection with a massive scheme to steal and launder nearly half a billion dollars from the Bank of China, Justice Department officials announced Tuesday.
The former managers of the state-owned Bank of China are alleged to have been engaged in an elaborate plot in which they stole $485 million by running funds through front companies and financial institutions in Hong Kong, Vancouver and Las Vegas, officials said.
They allegedly planned to immigrate to the United States with their wives and gain citizenship through schemes involving phony documents and sham marriages.
A federal grand jury in Las Vegas brought the new charges against the defendants, who were first jailed in September 2004 on charges of violating immigration laws for trying to illegally gain U.S. citizenship.
A third Chinese banker involved in the alleged conspiracy has pleaded guilty in Las Vegas and returned to China, where he is being prosecuted for embezzlement and bribery.
In Washington, Assistant Attorney General Alice Fisher issued a statement commending prosecutors for untangling what she called a “complex scheme of racketeering, money laundering and fraud”.
“We will continue to work closely with our international partners to make sure that the United States is never seen as a haven for criminals to launder the proceeds of their illegal conduct,” Fisher said.
Documents identified those indicted as former bankers bankers Xu Chaofan and Xu Guojun and their wives, Kuang Wan Fang and Yu Ying Yi, who prosecutors claim actively assisted their husbands in the scheme.
Find this article at:
http://www.cnn.com/2006/LAW/01/31/china.bank/index.html
3. Peter Begley | February 2nd, 2006 at 1:19 am
Addressing the final question, whether international corporate governance standards are diverging or converging, my personal experience and observations over the years seem to point to a general convergence. There are arguably many instances of localized discrepancies, yet it certainly seems from my point of view (which is probably, though unintentionally, very US-centric) that the world as a whole is moving toward a shared ideal of governance standards.
I think many things are causing this, though none more blatantly as the proliferation of information. Whether it is being distributed by television, movies, the internet, or other media, widespread access is clearly helping to meld business norms and expectations. Friedman points out this dynamic many times in his book yet the concept seems so obvious (…”Duh!”) that I think a bigger issue is brewing.
If you are from the generation that grew up using the internet, sending email, watching MTV, etc., this ‘access to information’ hardly seems like a mind-altering concept. But if you remember the days when a facsimile was high technology, or a touch-tone phone for that matter, it is less likely that you would gloss over the importance of the power of information access. Who cares, right? What’s the relevance of that point? I have no idea—it depends on how you view globalization and the cultural shifts that are tagging along for the ride.
What I can say is that my perception of right and wrong, good and bad, equitable and not equitable, etc. are heavily influenced by the society that I grew up in. For better or worse, things have since changed considerably. I think social norms and expectations ultimately define the direction in which corporate governance will move, and as we move closer and closer to a confluence of ideals, commerce, and information exchange on a global level, I would hope that we are pulling the right lessons from history as our guide.
4. Peter Begley | February 7th, 2006 at 8:15 am
Jack Yan has a pretty interesting post about globalization that I think relates to this topic quite well: Why Some Resent Globalization—And What We Need To Do
5. Christopher Riffel | March 17th, 2006 at 11:29 am
Peter has some good points and, for the most part, I agree with him. It is evident to me that international corporate governance standards are converging, though I don’t necessarily thing that this is a good thing. I find it interesting that America has been about acceptance and the welcoming of other cultures into the whole of what would become our own culture for hundreds of years. That said, once we became a strong world power, our nation decided that we needed to make the rest of the world more like us. I think we have made huge advances in technology that have made it easier for us to impose our will on other cultures. The proliferation of information is an amazing and powerful thing, but I think it is sad that we find it so difficult to deal with cultures until they move to our way of thinking. To me, that is one of the most interesting things about this whole China trip. We are going to be entering a culture that is so radically different than ours I don’t even know what to expect. At the same time, it bothers me that American companies participate in the growth of China by exploiting cheap labor or filling its high-rise buildings with our cooperate structures. China wants and perhaps needs the growth that American companies are, in part, bringing to it, but that doesn’t necessarily mean they need to grow in the same way that we have grown.
6. Peter Begley | March 17th, 2006 at 12:15 pm
Chris: I do not think you are necessarily implying this, but I want to be certain that it is clear that I do not particularly think the convergence of ideals is a good thing either. Further, I am fairly critical of some stereotypically ‘American’ ideologies such as the assumption that ‘our way is the best way’ though I do not think I convey that in the above comments.
7. Christopher Riffel | March 19th, 2006 at 1:32 am
We are on the same page Peter. Cheers.
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