Enhancing Director's Integrity in People's Republic of China

The effectiveness of the legal system has a crucial impact on a country’s business prospects and has a direct impact on international society’s confidence in that country. Thus, it is of great benefit to China, which is rapidly becoming one of the world’s largest economies, to establish and maintain an effective legal system to assist in the sustainable growth of its economy. Owing to the poor practice and apparent lack of integrity in China’s listed companies, establishing a streamlined legal framework capable of deterring directors from abusing their power and promoting directors’ stewardship of the company has become a pressing issue in China. Nevertheless, a double agency costs problem and the unique Guanxi tradition in China have made the regulation of director behaviour a particularly onerous task for China’s regulators.