1.1 Background to the reserach
Corporate governance in China is much about the culture rather than the business and although the situation seems to be improving yet this research shall provide insights into the country’s age-old practices that need to be changed. The research shall focus on an automotive retail company “Inchcape” established in the UK, that wants to expand its business into China. Expansion requires a detailed study of the corporate governance of the country since it’s the culture and the corporate governance code that determine the success of a company. Inchcape is a leading automotive retail company in UK.
The competitive pressures inUKon autotmotive retailindustry have risen immensely with the introduction of Block Exemption Regulations that restrict retail companies from being attached to a single car manufacturer. The retailers have to continuously improve cars by adding advanced electronic components since the consumers inUKprefer the product quality over service quality. Corporate governance inChinais not as developed as that ofUK. Chinese corporate governance code spells out shareholders as the most important group and the code focuses on just two types of firms which include the state owned enterprises (SOE’s) and Listed companies. The corporate governance code inUKcovers all entities including shareholders and it focuses on having a strong and effective board that takes objective decisions overall. The code focuses on accountability, remuneration and effectiveness of the board. The paper shall focus on comparing the corporate governance codes of the two countries and the way the difference in codes will effect the company’s operations and profitability (Liu, Qiao, Joe Lu, 2004). Corporate Governance inChinahas taken a new face afterChina’s accession to WTO and corporate law is a major aspect in the WTO reforms that have yielded major institutional changes inChinafrom being a planned economy to a market economy (Zhang Weiying,1999).
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