Implementing Corporate Governance For PRC Companies - Post GITIC

The spectacular collapse of the Guangdong International Trust and Investment Corporation ("GITIC") in 1999 leaving over US$2 billion of irrevocable loans highlighted some of the deep-rooted problems of corporate governance in the PRC and the need for urgent reforms.  Among the reasons for GITIC's failure were poor management, rash investments, lack of risk management systems and inefficient operations.

Many of the systemic problems in the PRC came about because most listed companies were re-structured State-owned enterprises or were controlled by government agencies with directors and management chosen by bureaucrats.  There were difficulties in removing non-performing directors and the senior management had little incentive to improve performance or pay attention to the interests of minority shareholders.