August 07, 2007
Interesting Viewpoint On SOX from China
Everything is about perspective. This article from the Standard Chinese newspaper speaks about the fifth anniversary of Sarbanes Oxley. This journalist discusses the pros and cons of regulation in markets. It is quite interesting the approach that he takes regarding regulation. He notes that many people find any regulations authoritarian. He indicates that regulations if well done are actually support for business.
This is quite interesting considering the uproar and furor that has gone concerning Sarbanes Oxley over the past five years. This journalist takes a different approach and indicates that China may do well to consider something like a Sarbanes Oxley because there is so much uncertainty about business and ethics in China.
He indicates that many in the West believe that Sarbanes Oxley is in fact authoritarian but he indicates that in China they know where authoritarian is and is something quite different than Sarbanes Oxley. He believes that the struggle to validate business in China while moving towards democracy is a challenge and cannot occur without the proper regulations.
This is quite refreshing and quite instructive for those of us who have done so much review on this legislation. It must be amusing to this reporter level of whining and Chicken Little types of arguments that occurred regarding this legislation.
We on this blog have often indicated our support for Sarbanes Oxley and continue to do so. But must admit of this approach is very unique and it always is interesting to hear from someone with a completely different perspective that is completely valid in a much different way.
For the complete article, click here. Here is an excerpt:
"Truth be known, today's business could not operate without regulations. The introduction of the joint stock company as a structure and the subsequent invention of limited shareholder liability in the early nineteenth century, ensuring shareholders are only liable to lose the amount they have invested in the advent of a company's insolvency, were all regulatory instruments designed not to block the flow of business but to free it up.
Middle-class shareholders in the 18th century - we might call them retail shareholders today - would not have felt enough confidence in investing in, say, steam-driven infrastructure or other industrial revolution advancements without the back-up of governments in the shape of such laws.
It is likely, therefore, that those developments, leading to amassing of great fortunes, an extraordinary distribution of wealth, and the establishment of the modern capitalist model, would not have occurred without government regulation.
In fact, rather than calling it "regulation," we might call it "support."
Every business utilizes what has become known as a "license to operate." This is a license effectively held by the wider society and generally - though not always - entrusted to governments, which allows businesses to function and be accepted in a wider sense...
China, if it is put into action Deng's epithet "Capitalism with Chinese characteristics," needs to balance the power of business with the rights of the people. This is particularly problematic in an authoritarian state run by a government obsessed with holding onto the reins and keeping the largest national population in the world from tilting towards Western-style democracy.
Capital flight is not an issue for China. Civil unrest is more likely and corruption and graft is a major issue driving it. So perhaps it might be the moment to introduce stronger regulations - a la SOx - to enable something like a free market to run effectively and equitably.
But, that pro-business balance has to be maintained. Without a democratic system, feedback loops are tangled or non-existent and this may lead to poorly devised schemes, bad policy and, eventually, bad laws. Bad laws do not help anyone.
Many people see SOx as a form of US authoritarianism, placing obstacles in front of the free market beast that has thrived there for decades.
Those in China know what authoritarianism is, and SOx isn't it.
China needs some strong corporate laws to ensure the economy doesn't eat itself. Beijing could do worse than to look closely at SOx.
James Rose is editor of www.corporategovernance-asia.com"
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
This is quite interesting considering the uproar and furor that has gone concerning Sarbanes Oxley over the past five years. This journalist takes a different approach and indicates that China may do well to consider something like a Sarbanes Oxley because there is so much uncertainty about business and ethics in China.
He indicates that many in the West believe that Sarbanes Oxley is in fact authoritarian but he indicates that in China they know where authoritarian is and is something quite different than Sarbanes Oxley. He believes that the struggle to validate business in China while moving towards democracy is a challenge and cannot occur without the proper regulations.
This is quite refreshing and quite instructive for those of us who have done so much review on this legislation. It must be amusing to this reporter level of whining and Chicken Little types of arguments that occurred regarding this legislation.
We on this blog have often indicated our support for Sarbanes Oxley and continue to do so. But must admit of this approach is very unique and it always is interesting to hear from someone with a completely different perspective that is completely valid in a much different way.
For the complete article, click here. Here is an excerpt:
"Truth be known, today's business could not operate without regulations. The introduction of the joint stock company as a structure and the subsequent invention of limited shareholder liability in the early nineteenth century, ensuring shareholders are only liable to lose the amount they have invested in the advent of a company's insolvency, were all regulatory instruments designed not to block the flow of business but to free it up.
Middle-class shareholders in the 18th century - we might call them retail shareholders today - would not have felt enough confidence in investing in, say, steam-driven infrastructure or other industrial revolution advancements without the back-up of governments in the shape of such laws.
It is likely, therefore, that those developments, leading to amassing of great fortunes, an extraordinary distribution of wealth, and the establishment of the modern capitalist model, would not have occurred without government regulation.
In fact, rather than calling it "regulation," we might call it "support."
Every business utilizes what has become known as a "license to operate." This is a license effectively held by the wider society and generally - though not always - entrusted to governments, which allows businesses to function and be accepted in a wider sense...
China, if it is put into action Deng's epithet "Capitalism with Chinese characteristics," needs to balance the power of business with the rights of the people. This is particularly problematic in an authoritarian state run by a government obsessed with holding onto the reins and keeping the largest national population in the world from tilting towards Western-style democracy.
Capital flight is not an issue for China. Civil unrest is more likely and corruption and graft is a major issue driving it. So perhaps it might be the moment to introduce stronger regulations - a la SOx - to enable something like a free market to run effectively and equitably.
But, that pro-business balance has to be maintained. Without a democratic system, feedback loops are tangled or non-existent and this may lead to poorly devised schemes, bad policy and, eventually, bad laws. Bad laws do not help anyone.
Many people see SOx as a form of US authoritarianism, placing obstacles in front of the free market beast that has thrived there for decades.
Those in China know what authoritarianism is, and SOx isn't it.
China needs some strong corporate laws to ensure the economy doesn't eat itself. Beijing could do worse than to look closely at SOx.
James Rose is editor of www.corporategovernance-asia.com"
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
