SO
ACCT 4271 Corporate Governance
Harvard Business School
Case review :
China Netcom :
Corporate Governance in China
Fon the eclaive eo G peg, 217
8 warvaro|susiness| SCHOOL
China Netcom: Corporate Governance in China (A)
ting pp pene ye ict image ie
«ong ha cpa ona nk Fri ya flr de
Seperate
Teng erg Chan CaN
1 October 208, Cairnan Zhang Chanang expacied 9 vere ust another China Nets!
hunt meng. fs panne company. China Newont Comminicton Croup Conpomton (Chine
etc Group, was a snteowned enter crested trough govern ied split f the
‘eecomonunitons indus in 2001 China Neca Group wos slocated the wine Set in 10,
Provinces muniopaliie and suman rghons in Norte Ching, which acco for of
the domestic wit capacity. in 200 st wp China Neem, which operated ts nore
evinces an lowed China Netcom ogo pu onthe Hang Kong an New York nok maha
‘Sac its PO, Cha Neco ud forused on rowing and expanding asec
‘Tho Osober board meting wat o discs the action of wine ast in four addons
rovnces ato weet a franca! advisor to ovenee the valun, Sine ¢ recomemtation fr t
[fecie ancal aco Fa aia been mace, Zang tobgh hate bord cl eons wold
‘emply spvetfon te maslton (EehbW I provides praes of mecsber oftoe bod ef recor ot
(Guta Neeom a ofthe end of esa 2507)
Taser, John Thomton voiced his concem over the selection process. Former president of
Golds Sach, cent profeaor at Tsinghua Unwesty, and. gon of China Netcom’ ee
Independent nenewcitve decors Thorton alerted Zhang and the board thot ‘his method cf
econ making vent against mover compre goverance prc epomfed out tha the
selection of faa advice sould be ae by the independent recone cay, these Genes
‘wer unbiased and, esuch, could beter protec bots the iterate of the minontysarcheldes tk
{he Bem, Such import desions had to be Uanupurat if the frm wanted io sect tee bee
anda of sted company.‘Thomlon’s input fed China Netcom wo begs a giant review of bow the fam was
‘overned. This rerew was nt without challenges Chinnan Zhang eis arm wate to all
Standard gba corporate governance paces but sho wesiné te eccomsndate te fat! ha the
state hough Chi Nesom Group, mained the majny shure in China Neer. They
‘wanted gaa tee changes whlesimutancoly ecing gba! andarde:To help meet
ous MeKinany was hired ads mene °
Now, to yea tate, Chaiman Zhang bed severil qumtons. Had inproved govemance
rates paved patho eterbunnesprtomance? Had alowed China Nevom mga con
‘nforcign cpt markes? Aleratve were fs pacts gg lear unl to empte wth
ese wanvparent fs SS
Corporate Governance in China
Cassa prem iene ep te i ny
ah oe coer errata eet
Sis ihemipsos cea Soe een ere
Seca eens
Eafe etiam nleerbd
With the 1990 launch of wo tock exchanges in Sangha! and Shenae, the Cine goverment
began erst change the processes of corporate governance Coney eompanice open t it
1d to meet bose poverance and secure low* Eeablished in 2998 the Chine Scares
‘egulatry Comino (CSRC) overs bok exchanges and asd a coccee fet of eulaone?
‘The CORC set out fo “eupervse the Bcevior of ted compares ta thei shrchaldes who ae
lable fr slevant information disclosure im secs manete™ Ths ws oe of the fst eer 0
‘mandate final dicosue rulrenents 0 Chia. The kapetua, howere, was fo ah fe
requirements of other slack exturger Ae mote Chinese crnparics coos ist shares DOO
loreal and internationally, adherence intestinal operate gvrnaes sands Bea
‘pore important®
China's Adopted Governance Struct
istorii, the govemance trctare in mae! Chinese tate owned enterpins (SOE) flowed
tworered approach dat included a board of dawors and 8 mipessry bond. The urd