THE HARMONIZATION PRINCIPLE IN CORPORATE GOVERNANCE REFORM IN CHINA

The agency theory has laid a foundation of knowledge for the review and design of corporate governance in large public corporations, but they are never exclusively symbiotic. Another insight to observe corporate governance is the adaptive efficiency demonstrated by the level of development of venture capital. Therefore, any proposal for corporate governance reform in large public corporations must be based on perspectives of both the agency theory and the adaptive efficiency theory. Otherwise, it is likely that improvements to one value (i.e. improvements by means of agency) will be at the expense of the other (i.e. improvements by means of adaptive efficiency). This theory is termed as the “harmonization principle.” Taking the Chinese State-Controlled Listed Companies (SCLCs) for example, the harmonization principle is applied to testing the reform measures for its corporate governance. With this demonstration, it intends to show the normative implication of the harmonization principle in the overhaul of corporate governance of large public corporations worldwide.