Foreign Political Interference in the Governance of Listed Companies: A Market and Behavioral Analysis
Journal
Duke Journal of Comparative and International Law
Journal Volume
31
Pages
301
Date Issued
2021
Author(s)
Lin, Yu-Hsin
Abstract
This Article examines how regulators and a company’s stakeholders
can and should respond to external political interference from a foreign
government. This Article argues that the interactions created by different
stakeholders influence the market’s response to such interference. This
Article uses the “Party building” political movement in China to illustrate
how Chinese businesses listed in Hong Kong reacted to interference from
the Chinese Communist Party (CCP). The Party building is the CCP’s
attempt to strengthen its control of listed companies by: having CCP
organization’s in a company (organizational interference), controlling
management decisions (management interference), and controlling human
resources (human resources interference). The political campaign offers a
rare chance to observe how corporate stakeholders respond to external
political interference from another country. This Article shows that fewer
than a third of the companies examined were early adopters of Party
building provisions. This suggests that managers have not been willing to
accept political interference, especially when their companies are registered
outside of China. However, companies that have adopted “Party building”
provisions in their corporate charters have generally accepted some
organizational interference or managerial interference. Still, they have been
less accommodating to more direct control over personnel or human
resources decisions. Consequently, this Article argues that securities
regulators, in an open market, should adopt a market-driven approach to
counter foreign political interference that empowers shareholders by
increasing transparency, instead of implementing drastic interventions, such
as mandatory delisting.
Subjects
political influence, corporate governance, China, Dangjian
Type
journal article