Though it may be becoming increasingly common among western countries, Asia has still a long way to go when it comes to corporate governance. Population giants like India and China are on the top of the list growing steadily and productively towards a new level of business control.
Many Asian countries like the ones mentioned above have been subjected to a halt in economic growth due to the reining business issues of governance. This means that though Asian countries might be achieving success, for now but in the future, the existence these issues can prove to be greatly harmful.
Here is a look at the Asian issues of corporate governance that have long been a menace for growing economies.
Businesses that are run by particular families are one of the prime issues that are hurdling economic growth in Asian countries. For instance, a certain appliance company dealing in Chinese electronics e.g. Gome Electronics, failed to adhere to best practices. This led to the imprisonment of its owner along with unwanted bad publicity.
Since the owner had been given a jail sentence of fourteen years, he decided to maintain the family’s control on the business from behind the bars. What he did was that he pledged the repositioning of his sister along with his lawyer on the directorial seats. This would mean that the shareholding minority of his company wouldn’t get a chance to be on the board. Therefore, the rights of these shareholders must be protected from family firms.
Taiwan is also a growing economy with a potential to rise above the rest. However, its growth is hurdled by the lack of rights that are allotted to institutional investors. Taiwan’s slow governmental process has led to the exclusion of many big investors from shareholder meetings. This also includes the influence of family-owned businesses on government legislations.
The above mentioned attitude leads to a drop in long-time investments with investors feeling discouraged and worried about their future.
Asian issues of corporate governance can prove to be greatly effective in reducing cash flow and prosperity in countries like India and China etc.