State Ownership and Corporate Governance in China: An Executive Career Approach

Abstract

China’s state-owned enterprises (SOEs) now comprise over 60 percent of the largest 500 companies in China and more than 10 percent of Fortune Global 500 companies in the world. Despite their importance to China’s domestic economy and foreign investment strategy, many governance characteristics of the SOEs remain a black box, one of which is the SOEs’ executive composition and recruitment development. This Article shifts away from the typical focus on how the things function (e.g. ownership structure and board of directors) to who the people in charge are, which is an important approach to understanding corporate governance and economic development in countries with weak legal institutions. It investigates the legal guidelines of SOE executive recruitment and the evolution of educational, political and career attributes of the CEOs of China’s large SOEs over the past decade. This Article utilizes legal, historical, sociological, and comparative methods to explain the change and stability of the executive composition in China’s large SOEs. The executive recruitment shows an orientation toward politically-bounded and firm-specific professionalism as well as some faint potential of bottom-up and competition-driven marketization. The recruitment guidelines and empirical findings in this Article raise questions about the adequacy and capacity of existing international laws and enforcement in coping with the rise of Chinese SOEs, the challenges to improving Chinese corporate governance, and the underlying forces that form apparent similarities in elite composition across countries.