Lang Xianping: Why Is It Difficult for Enterprises in the Pearl River Delta to Grow? Why is it difficult for enterprises in the Pearl River Delta to grow? Why is there a shortage of migrant workers? Why do many private enterprises in mainland China, including Skyworth, frequently face doubts and even lawsuits in the Hong Kong stock market? Professor Lang Xianping from Chinese University of Hong Kong, known for 'Lang's Oversight', believes there are many reasons, but the most critical one is that Chinese enterprises lack the tradition of fiduciary responsibility, and at the same time, there is a lack of strict laws to punish those who breach trust. As a result, in the existing corporate culture in China, it is quite common for entrepreneurs to lack fiduciary responsibility towards the state, shareholders, and laborers. The path to rectification must first rely on the government to promote the rule of law, and secondly, enterprises need to gradually cultivate a corporate culture centered on fiduciary responsibility. Lang Xianping made these remarks yesterday at the International Forum on Chinese Corporate Culture held in Guangzhou. Lack of Strict Regulatory Measures in the Stock Market Lang Xianping pointed out that when ownership and management rights are separated, the issue of fiduciary responsibility arises. Operators should consciously respect and protect the interests of property owners during their management process, which constitutes a form of fiduciary responsibility. Subsequently, fiduciary responsibility evolves from being solely accountable to shareholders to being accountable to the state and employees. Lang Xianping noted that the Chinese securities market lacks strict regulatory measures like those in the United States, which significantly diminishes the effectiveness of merely learning from the operational measures of the U.S. Securities and Exchange Commission. For instance, due to stringent regulations in the U.S. stock market, its operation is relatively healthy, leading to higher and stable returns for U.S. social security funds entering the market, making it an excellent place for value appreciation. However, in China, the risks for social security funds entering the market are much greater. Furthermore, while the U.S. stock market is indeed dominated by institutional investors, its Securities and Exchange Commission has very strict and effective oversight on insider trading, making it difficult for institutional investors to manipulate stock prices. In contrast, without similarly strict oversight, introducing these institutional investors into the Chinese stock market may equate to bringing in larger speculators, which offers limited assistance in cultivating an investment-oriented mindset in the Chinese stock market. A notable example is that the stock prices of China Mobile, China Unicom, and China Telecom in the current Hong Kong stock market are to some extent already manipulated by American institutional investors. Lack of Fiduciary Responsibility Distresses Pearl River Delta Enterprises Lang Xianping pointed out that the negative effects of the lack of fiduciary responsibility are all-encompassing. For instance, this year's shortage of migrant workers is related to the lack of fiduciary responsibility of enterprise owners towards laborers; many private enterprises in the Pearl River Delta fail to grow due to the lack of fiduciary responsibility among professional managers; and the lack of fiduciary responsibility among professional managers may infringe upon the private property rights of private enterprises, causing private enterprise owners to hesitate to entrust their businesses to professional managers. However, in the face of fierce international competition, most first-generation entrepreneurs of private enterprises can no longer cope, placing them in a dilemma. When asked about his views on the recent lawsuits against several senior executives of Skyworth by the Hong Kong Independent Commission Against Corruption, Lang Xianping was reluctant to comment extensively, merely stating: “This indicates that they have not fulfilled their fiduciary responsibilities towards shareholders and employees well.” He further pointed out: It is natural for entrepreneurs to manage their enterprises well, but this is not enough; they must also reflect: as an entrepreneur, aside from making money for the enterprise, have they fulfilled their fiduciary responsibility towards society, shareholders, and employees? Delong Lost Due to Corporate Culture Violating Economic Principles Lang Xianping also shared his views on how Chinese private enterprises can cultivate a healthy corporate culture. He pointed out that corporate culture is not something created deliberately; the soul of corporate culture should be the courage to take on fiduciary responsibilities towards society, shareholders, and employees, and its foundation must comply with economic laws. Corporate cultures that do not conform to economic laws will eventually lead to significant failures for enterprises. Lang Xianping believes Delong is a good example. Delong's corporate culture is “proactive, seizing opportunities, and building the largest private enterprise in China through industrial integration.” Its corporate culture violates the basic principles of diversified operations. The most important principle and purpose of diversified operations is to hedge risks through industrial complementarity, enabling the enterprise to obtain a stable cash flow and ensure sustainable operations. However, Delong's diversification lacks complementarity; its integrated industries such as motorcycles, cement, heavy trucks, and finance do not have complementary relationships. When faced with major turning points like macro-control, multiple industries decline simultaneously, cash flow issues arise, and a break in the capital chain becomes inevitable. Background: The Formation Path of Fiduciary Responsibility Fiduciary responsibility can be formed in two ways: one represented by the UK, which has gradually formed over hundreds of years of corporate operation history, with a deep historical and cultural accumulation, where fulfilling fiduciary responsibility has become the consensus and behavioral guideline of most corporate operators. Therefore, in the UK, there is no need for strict regulation, allowing the entire property market, represented by the securities market, to operate healthily at a low cost. The other is represented by the U.S. The U.S. does not have a tradition of fulfilling fiduciary responsibility. Before 1929, behaviors such as stock price manipulation and insider trading, which reflect a lack of fiduciary responsibility, were also prevalent. However, Roosevelt's New Deal vigorously promoted a series of stringent laws to strengthen capital market regulation, severely striking at family and large speculator manipulation of the securities market, and maximizing the protection of small shareholders' interests, thereby paving the way for establishing a tradition of fiduciary responsibility through strict laws. The establishment of fiduciary responsibility has created a century of prosperity in the U.S., with a particularly convincing example being that the U.S. stock market has become the best place for American citizens to accumulate wealth. According to statistics, from 1940 to 1991, the average annual return of the U.S. stock market reached a very high level, essentially adding 7.6 percentage points on top of the annual bank interest rate. With such a stable high return rate, social security funds entering the market can maintain high returns over the long term, allowing the American social security system to operate smoothly and efficiently.
