Yinguangxia(“YGX”), as a previous star Chinese own-stated enterprise, experiencing its rise and decline and reflecting many problems on accounting system and Corporate Governance in China.
Although China has been changing a lot to accelerate its reform of converting a centrally planned economy into a market oriented system, diversify share ownership structure, the state’s predominance in the market and the ambiguity in the separation of the role of the government form that of the market had left much room for speculation by corrupt and unethical state officials to exert discretionary influences on market activities.
Meanwhile, as accounting and auditing law and standards had developed rapidly, and credit had to be given to the progress of China’s financial reporting standards, there was a lack of legal framework to support its enforcement, which directly caused many malfeasances of YGX, like mysterious identity of Fidelity, questionable existence of production facilities, boasting of production capacity and technological improvement, etc.
As future business management staff working in China, it is quite important for us to realize the current situation in China from no matter its political area or corporate governance system. Only with this background study, can we grasp the vital points which should be paid highly attention on management. With a clear corporate governance concept, we could supervise company’s principles of integrity, respect, honesty, quality, responsibility, and fairness. All these principles are the foundation of a corporation. As a listed company like YGX, especially a SOE, it should build and deepen credibility and trust with its employees, customers, investors, stockholders and community.
According to what we have learned in class about corporate governance in China, I think the root problems existing in YGX can be concluded as the following, first, its limited effectiveness of independent directors,...