Foreign Political Interference in the Governance of Listed Companies: A Market and Behavioral Analysis

31 Duke Journal of Comparative and International Law 301-349 (2021)

49 Pages Posted: 2 Aug 2021

See all articles by Christopher C. Chen

Christopher C. Chen

National Taiwan University - College of Law

Lauren Yu-Hsin Lin

City University of Hong Kong (CityU) - School of Law; City University of Hong Kong (CityU) - Centre for Chinese & Comparative Law

Date Written: June 28, 2021

Abstract

This Article examines how regulators and a company’s stakeholders can and should respond to external political interference from a foreign government. This Article argues that the interactions created by different stakeholders influence the market’s response to such interference. This Article uses the “Party building” political movement in China to illustrate how Chinese businesses listed in Hong Kong reacted to interference from the Chinese Communist Party (CCP). The Party building is the CCP’s attempt to strengthen its control of listed companies by: having CCP organization’s in a company (organizational interference), controlling management decisions (management interference), and human resources (human resources interference). The political campaign offers a rare chance to observe how corporate stakeholders respond to external political interference from another country. This Article shows that fewer than a third of the companies examined were early adopters of Party building provisions. This suggests that managers have not been willing to accept political interference, especially when their companies’ are registered outside of China. However, companies that have adopted “Party building” provisions in their corporate charters have generally accepted some organizational interference or managerial interference. Still, they have been less accommodating to more direct control over personnel or human resources decisions. Consequently, this Article argues that securities regulators, in an open market, should adopt a market-driven approach to counter foreign political interference that empowers shareholders by increasing transparency, instead of implementing drastic interventions, such as mandatory delisting.

Keywords: Chinese firms, Cross-listing, Party-building, Political interference, Foreign government

JEL Classification: K22, G38

Suggested Citation

Chen, Christopher Chao-hung and Lin, Lauren Yu-Hsin, Foreign Political Interference in the Governance of Listed Companies: A Market and Behavioral Analysis (June 28, 2021). 31 Duke Journal of Comparative and International Law 301-349 (2021), Available at SSRN: https://ssrn.com/abstract=3895538

Christopher Chao-hung Chen

National Taiwan University - College of Law ( email )

No.1, Sec.4, Roosevelt Road
Taipei, 10617, 10617
Taiwan

Lauren Yu-Hsin Lin (Contact Author)

City University of Hong Kong (CityU) - School of Law ( email )

Tat Chee Avenue
Kowloon
Hong Kong

HOME PAGE: http://www.cityu.edu.hk/slw/about-school/our-people/dr-lin-lauren-yu-hsin

City University of Hong Kong (CityU) - Centre for Chinese & Comparative Law

83 Tat Chee Avenue
Room P5300, 5th Floor, Academic 1
Kowloon Tong
Hong Kong

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