What is law?
Does ‘law’ mean different things in different societies?
Corporate governance laws and regulations in Asian jurisdictions have mostly been modelled on those operating in the western nations that were former colonial powers in Asia. But key differences remain. Identify some of those key differences using examples drawn from at least two Asian jurisdictions.
1. Law is the command of the sovereign. The sovereign is the governing body of a particular jurisdiction and in the present global scenario denotes the government of a particular state. These are basically rules and regulations which are put in place to ensure that the societal structure functions in way that is acceptable to all the subjects to the same. Law can encompass a wide variety of rules and regulations. Primarily the sources of law are statutes, case laws and customs. These are followed in most jurisdictions and helps create a pathway through which the legal framework of a particular jurisdiction is structured. A statute is a particular act of parliament, or a codified body of rules that gains the force of law through the command of the sovereign in a particular jurisdiction. Customs on the other hand are not concrete sources of law as it is treated as a secondary source of law. A secondary source of law is not necessarily binding but maybe incorporated into the framework of laws within a particular jurisdiction. In various jurisdictions customs do have the force of law and thus are accepted as binding laws (Chen, 2015). The contrast for the same would be jurisdiction where laws have to be specifically codified to be able to have the force of law. In the Republic of China the corporate governance principles are binding on companies that function within the jurisdiction of China. These governance principles are not codified as laws but are binding irrespective of the same. The idea here is to ensure good governance for corporations (Cao, 2017). The government of South Korea functions based on the powers and functions that are prescribed in their constitution. This is a codified statute and not a custom and is binding on all those who are subject to the same.
2. Corporate governance refers to various administrative processes that are taken by the members of the highest tier of the organizational hierarchy to ensure that the acts of the company are aligned with the best interests of the company and all stakeholders involved in the same. Corporate governance principles refer to various ethical prescriptions ideally made by the government to make sure that the interests of all the stakeholders involved in the same are protected. There are various ways in which the interests of the stakeholders can be protected and safeguarded and governance mechanisms are put in place by jurisdictions. In the Republic of China the corporate governance principles prescribed by the government ensure that shareholders rights are protected but are also more inclined towards societal obligations of the corporation. The society is taken as a stakeholder to ensure Corporate Social Responsibility is observed as the highest priority (Morck & Yeung, 2014). The republic of South Korea also imbibes various anti-trust and anti-competitive principles into its corporate governance structure. However, the principles here would not constitute an obligation towards the society as the primary stakeholder (Gupta & Sharma, 2014). The corporate governance principles in this system adhere to protection of shareholder’s interests as the primary stakeholders and this thus ensures that the interests of the company as a whole are adhered to. However an additional obligation towards the society would not be imposed on all corporations functioning within the jurisdiction and this thus gives the corporations an opportunity to focus purely on the profit making objective that it was incorporated for. This would lead to more flexible functioning of the affairs of the company and it would thus create an ideological space for better governance as it focuses on its business objectives as the highest priority.
Cao, D. (2017). Chinese law: A language perspective. Routledge.
Chen, J. (2015). Chinese law: Context and transformation. Brill.
Gupta, P., & Sharma, A. M. (2014). A study of the impact of corporate governance practices on firm performance in Indian and South Korean companies. Procedia-Social and Behavioral Sciences, 133, 4-11.
Morck, R., & Yeung, B. (2014). Corporate governance in China. Journal of Applied Corporate Finance, 26(3), 20-41.