On the Loughborough MBA, we like to ask the big questions and keep you up to date with the latest research. One question we posed recently was: How do corporate governance structures in China affect executive pay and if so how does this affect company performance?
Professor Amon Chizema – an expert on comparative international corporate governance in European, African and Asian organisations – gives his insights, based on his recent research…
Often, when we compare governance structures and specifically boards, we tend to focus on the UK and the US, which are quite similar, and compare them with trends in other countries, especially Japan and Germany.
We wanted to look at China because unlike in the West it is very difficult to separate corporate governance from political institutions, so we’re studying political directors in firms. China is fascinating because it’s got state-owned enterprises – and it’s actually these that are driving the growth in China, not the private companies. It’s very exciting to see a different approach to corporate governance coupled with business success.
In a recently (peer reviewed) research paper published in Strategic Management Journal, my colleagues and I investigated politically connected boards in China, where the non-executive board members are/were politicians or government officials, and looked at what their role and influence is in determining executive pay for their company. Our argument is that these sorts of politically connected non-executive board members represent the interests of the state, which traditionally in China could mean an egalitarian approach to pay.
I’ve already mentioned that in China it’s the state-owned companies rather than privately owned companies that are driving economic growth. From our research, in instances where there are more political directors on a board, we identified 3 really interesting findings:
Amon Chizema is Professor of International Business and Strategy and is Head of Discipline, International Business, Strategy and Innovation at Loughborough University. He can be reached on firstname.lastname@example.org
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