Rethinking the Relevance or Irrelevance of Directors' Duties in China: The Intersection between Culture and Laws

This paper investigates how culture affects people's attitudes towards directors' duties in the People's Republic of China by surveying a sample of Chinese business executives. If cultural practices lead people to behave differently from what the law prescribes, it is a serious regulatory oversight. Our results suggest that Chinese cultural values do matter when it comes to the perception of breaches of directors' duties. Specifically, we find that respondents who identify with moral-discipline related traditional Chinese values are more lenient to the chairman breaching his director's duties, whereas respondents who subscribe to modern Chinese values are less receptive to the director failing to report the chairman's contravention of his director's duties. These results suggest that it is imperative for China's law-makers to rethink their approach to regulating directors' duties instead of the wholesale transplantation of laws from Western countries.