代写 Business and Government in the Global Context BUSM3886

Business and Government in the Global Context BUSM3886
Business and government forms - an overview
LECTURE 2 SEMESTER 1, 2016
 





Part 1 Learning Outcomes
This lecture and workshop aims to provide increased knowledge and understanding of business structures and how they are creatures of government.  By the end of this lecture you should understand:
Business structures are a product of history and political ideology
Governments regulate business structures and can facilitate or hinder business, including transnational business
Political choices inform available forms and what those structures can or cannot do
Tutorial Discussion Task: What factors underpin the western vs Chinese approach to State Owned Enterprises. What factors are driving change to the Chinese approach?
Consider what you know about the political economy of Western countries and China.
Background Readings – Available in the RMIT Library
Hanrahan, P, Ramsay, I , Stapledon, G “Commercial Applications of Company Law 12th Ed.” 2011, CCH Australia: Sydney.  Ch 1 ‘About companies’ & Ch 3 ‘Companies and business planning’. 
 Chen, J “Chinese Law: Context and Transformation”.  Ch 13 ‘Law on Business Entities.” 2008, Martinus Nijhoff: Leiden. 
Articles on Reforms to State Owned Enterprises in China
Zhang, D & Freestone, O (2013) “China’s Unfinished State Owned Enterprise Reforms” Economic Roundup, Issue 2, 2013.  See:http://www.treasury.gov.au/PublicationsAndMedia/Publications/2013/Economic-Roundup-Issue-2/Economic-Roundup/Chinas-unfinished-SOE-reforms
“China Issues guideline to deepen SOE reform.” Xinhua (13 September 2015) see:http://news.xinhuanet.com/english/2015-09/13/c_134620127.htm
De Jonge, A (17 Sept 2015) “China’s grip still tight on state-owned enterprises” The Conversation. See:https://theconversation.com/chinas-grip-still-tight-on-state-owned-enterprises-47478
“Overhaul of Chinese state-owned firms splits them into commercial and not-for-profit operations” South China Morning Post (7 September 2015).  See:http://www.scmp.com/news/china/policies-politics/article/1856060/overhaul-chinese-state-owned-firms-will-split-them
Panda, A (14 September 2015) “Is China Serious About Its New State-Owned Enterprise Reforms?” The Diplomat See:http://thediplomat.com/2015/09/is-china-serious-about-its-new-state-owned-enterprise-reforms/
Lau, J (1 December 2015) “Profits at China’s state-owned enterprises poised to plunge further”. South China Morning Post See: http://www.scmp.com/business/companies/article/1885477/profits-chinas-state-owned-enterprises-poised-plunge-further
Wu, W & Zhou, L (3 January 2016) “Chinese state-owned finance firm goes global to raise funds amid national slowdown.” South China Morning Post See:http://www.scmp.com/news/china/article/1897720/chinese-state-owned-finance-firm-goes-global-raise-funds-amid-national
Barton D and Ye, M (July 2013) “Developing China’s business leaders: A conversation with Yingyi Qian”. McKinsey Quarterly See http://www.mckinsey.com/global-themes/leadership/developing-chinas-business-leaders


In the West - How did Companies Develop?
1500s – England – emergence of the “corporations aggregate”
Means by which a group of people could hold property to advance collective aims
Municipal boroughs, trade guilds and colleges conferred identity that was independent of the fluctuating identity of members
Creation required the consent of the Crown
In the West  - How did companies develop?
1600s – England – notion of joint stock developed.
Mechanism developed whereby an investor could invest money in return for a share of the profits of the venture.
Colonial expansion.  Mostly occurred in unincorporated ventures, although a few eg. British East India Company, Virginia Company were incorporated.  These were rare as required Royal Charter.

In the West  - How did companies develop?
Granted a charter by King James I in 1606, the Virginia Company was a joint stock company created to establish settlements in the New World.  This is the seal of the Virginia company which established the first English settlement in Virginia in 1607.
In the West  - How did companies develop?
In the early 1700s speculation in joint stock was rife.  The South Sea Company went in value from 100 pounds to 1000 pounds in days.
Estimated the value of speculative investment was 500 million pounds, more than twice the value of all the land in England.
Bubble collapsed in 1720 leading to large losses.  Parliament passed the Bubble Act of 1720 and banned joint stock without Royal Charter.
How did companies develop?
Factors driving the need to have multiple investors did not go away.
Lawyers developed a “deed of settlement company” to get around the Bubble Act.
Property in the venture was held by trust and investors received a share in trust property.  Complex to establish and administer and potential liability for investors.
How did companies develop?
1825 repeal of the Bubble Act
1844 Act allowed businesses to become companies by a process of registration rather than Royal Charter
Such companies had separate legal personality.  This means they could sue and be sued.
1855 Limited Liability Act introduced limited liability.
1862 Companies Act (UK) was adopted by the Australian colonies and is the basis of modern Australian company structures. 
Characteristics of Modern Companies
Separate Legal Personality: At law a company is a separate person from its members and those who manage its operations
Limited Liability:  shareholders are not liable to contribute additional money to meet the company’s debts beyond the amount initially paid for the share.
The legal rules that separate the company from its participants are referred to as “the corporate veil”


Characteristics of Modern Companies
Characteristics of Modern Companies
Consequences
A company’s obligations and liabilities are its own and not those of its participants
A company can sue and be sued in its own name
A company has perpetual succession
A company’s property is not the property of its participants
A company can contract with its controlling participants
Other forms of organisation in Australia
Unincorporated associations
Incorporated associations
Sole traders
General partnership
Limited liability partnership
Joint ventures
Trusts
Managed investment schemes
These forms can be used to facilitate multiple types of businesses
Proprietary companies and publicly listed companies
Franchises
Not for profits
Trans-national corporations
Multi-national corporations
State owned enterprises
Public and private partnerships (PPPs)


Chinese business structures
Chinese business structures
Chinese law has also evolved to create a domestic law of business structures
Entities available for business in China reflect different philosophical tensions to those in the West.
Tension between socialism and private economy
Socialist ideology:  socialist public ownership and transforming or eliminating forms of private economy.
Private law institutions: focus on economic freedom and equality of civil law parties in a market economy.

Chinese business structures
Pre 1988 – individual economy only allowed as a complement to the socialist public economy: Articles 6 and 11 (1982 Constitution)
1988 Constitutional amendments – Article 11 – amended to “permit a private economy to exist and develop within the limits prescribed by law”.
Legalised a largely unregulated sector that was already operating
Business started blossoming

Chinese business structures
1999 Article 11 amended again - Individual economy longer a complement to socialist public economy but “an important component of the country’s socialist market economy.”
Represented elevation of the role of the non-public economy in the state economic system.
Article 11 again amended in 2004 to include “individual economy” as well as “other non-public economy” .  This was required because of flourishing of the private sector in different business forms.  

Chinese business structures
Laws and administrative regulations lay down provisions governing organisational structures
Also confer beneficial or discriminatory treatments on various forms
Argument this lays down an unequal and unfair environment for economic competition among different economic entities as business not “equal” to compete in the market.
See: Chen, J “From Administrative Authorisation to Private Law: A Comparative Perspective of the Developing Civil Law in PRC” (Dordrecht: Boston, 1995). 
Chinese business structures
Three types
Domestic investment enterprises
Hong Kong, Macau, Taiwan investment enterprises
Foreign investment enterprises

See Provisions concerning Enterprise Registration Classification issued by State Statistics Bureau on 28 September 1998.
Chinese business structures
Domestic Investment enterprises
State owned enterprises
Collective enterprises
Shareholding co-operatives
Joint operations
Limited liability companies
Companies limited by shares
Private enterprises
Chinese business structures
Hong Kong, Macau, Taiwan Investment Enterprises
Equity JVs
Contractual JVs
Sole investment enterprises by HK, Macau or Taiwan investors
Companies limited by shares with HK, Macau or Taiwan investors.
Chinese business structures
Foreign investment enterprises
Sino-foreign equity JVs
Sino-foreign contractual JVs
Wholly foreign owned enterprises
Companies limited by shares with foreign investment.
Comparing approaches
Availability of business structures reflects history and political ideology of prevailing governments
Different legislative responses to different business forms
“Who cares what colour the cat is, as long as it catches mice.”  - Attributed to Deng Xiaoping.

Comparing approaches - The Public Sector
In many countries government is comprised of central government, local government, and businesses that are owned by government
In the last twenty years the number
of government-owned firms (or state owned enterprises (SOEs) in many OECD countries has decreased considerably.
In the US (Bank of America) , Australia (Australia Post), the UK (Royal Mail) few remain due to a liking for Friedman and Hayek’s economic theory.
150,000 SOEs in China, less than 30 in the UK, approximately 10 in the USA. 
Problems with China’s SOEs - 2014

代写 Business and Government in the Global Context BUSM3886

Failed to comply with the government’s order to focus on what are deemed to be “strategic sectors” such as aviation, power and telecommunications - industries that the Communist Party believes it must dominate in order to maintain control of an increasingly complex economy. (The Economist 2014)
“Profitability of state companies has fallen, even as private firms have grown in strength. SOE returns are now about half those of their non-state peers.” (The Economist 2014)
Some 80,000 are “in the economic lowlands” - they run hotels, build property developments, manage restaurants and operate shopping malls. “The temptations to branch out have been too great: relative to their private-sector peers, they have benefited from cheaper financing from state-owned banks, favouritism from local governments in land sales and a lighter touch from regulators” (The Economist 2014)
http://www.economist.com/news/china/21614240-reform-state-companies-back-agenda-fixing-china-inc

Problems with China’s SOEs - now
Since then, things have gotten worse! Profits fell 9.8% in the first 10 months of 2015 (South China Morning Post 2015)
Energy Sectors such as coal mining suffering due to China’s economic slowdown, excess supply, lack of demand and the shift away from traditional industries in the old economy towards the tertiary sector.  Manufacturing sector suffering from stockpiling (SCMP 2015)
Crucial missing factor is demand.  Lower interest rates cannot compensate for this (SCMP 2015)
Main purpose for SOEs is to absorb employment.  This makes them poor economic performers. (SCMP 2015)
http://www.scmp.com/business/companies/article/1885477/profits-chinas-state-owned-enterprises-poised-plunge-further

September 2015 China announces reforms to its SOEs
Splits into commercial and not-for-profit corporations
Reflects the need for public goods
Role of government and business
GOVERNMENT and POLITICS
GOVERNMENT and BUSINESS
Dr David Schmitt
Part 2 Aims & Objectives
WHAT IS POLITICS?
Numerous definitions
Governing mankind through deception ( Isaac D’Israeli)
The art of the possible (Lord Butler)
Control and reconciliation of diverse interests (Aristotle)
  Scruton Roger (1982)
The exercise of power to gain advantage over others – access to scarce resources – satisfy self-interest (Rational Choice Theory)

The natural state of human affairs? 

WHY GOVERNMENT?
To peacefully resolve political situations
Political Situations:
1. Conflict
2. Exercise of power
3. Uncertainty
Elaborate governmental structures and political institutions required to ensure peaceful resolution of political situations.

What Is Government?
“The exercise of influence and control through law and coercion, over a particular group of people formed into a state.” (Scruton, 1982)
The management of the state - government – management of/for citizens
The body that manages the state – the government (executive – elected or appointed)
“The state is the organisation which monopolises legitimate violence over a given territory.” (Weber in Scruton, 1982)
Noun: the Government     Verb: government
GOVERMENT versus GOVERNANCE
Government usually understood as control over – top down – but responsible to the majority, monarch, clergy – rule via a legitimate mandate
Governance – based on the recognition of stakeholders and involves a more inclusive form of management – responsive and responsible to all stakeholders, all citizens more fragile mandate and legitimacy. Consequence of increasing complexity
Basic Types of Government
Constitutional and Non-constitutional
Absolute and Limited
Political (institutional) and Non-political (despotic, primitive)
Constitutional and Limited Forms: (Limit the power of government – people sovereign)
Parliamentary (Constitutional Monarchy) and Presidential
Absolute: (Unlimited government power – ruler or party sovereign)
Monarchical and One Party States

Structure of Governments: Formal
FORMAL (Constitutional Recognition)
   Executive (Cabinet Ministers and their departments)
   Legislature/Parliament (House of Reps & Senate)
   Judiciary  (police/military)(Legal/Court system – various levels)
  Constitution provides a blueprint for above

Separation of Powers (independent, defined functions): Checks and balances to prevent dictatorship of the one and the many (mob)
Legislature: makes the laws
Executive: implement the laws
Judiciary : enforce the laws

Theory and practice of above are quite often in conflict
Federal systems are complicated by competing governments




Structure of Governments: Informal
INFORMAL Political Agents (Not Recognised in a Constitution)

  The Press/Media – in all its forms

  Pressure groups – insider (eg business) and outsider (eg Unions)

  Lobbyists – paid agents of special interests

  Political parties – major and minor


Key Constraint on Government Power
At the end of the day it does not matter what form of government it is it still needs to serve the interests of the citizens – maintain legitimacy (mandate of heaven) to forestall electoral defeat or revolution.
The Nazi regime in Germany (1933-1945) put an enormous amount of effort into keeping the average German well off during the WWII.
Nature of Business-Government Relationship: It is political!
Questions?

代写 Business and Government in the Global Context BUSM3886