Cultural Perspective Of Outside Director System Transplantation

Investigation shows that so far the operation of outside director system in China is not successful, and even a failure to the better part. It's beyond the reach of outside directors to speak on behalf of the disadvantaged investors and to protect investors' interests due to their inferior position of dependence. The majority of Scholars attribute the failure to insufficient proportion of outside directors, inadequate quality of outside directors, inappropriate selection approaches, insufficient incentive mechanism, and non-accessibility to the right information for decision-making. These interpretations sound reasonable;nevertheless, they failed to access the essence of the causes resulting in the failure of outside director system in China. In this article, the author puts forward the hypothesis that the reasons for the dependence of outside directors in China lies in China specific culture, including national culture, law culture as well as corporation culture. Researches reveal that perceptual, collectivism and men ruling generally characterize Chinese national culture, which differs greatly from the culture of western countries, in which rational, individualism and law ruling are valued. Various theories and a long list of survey data well proved that the above-mentioned features of Chinese culture friends collectivism and dictates cooperation rather than competition, it raises dependence and reduces independence and therefore it is not suitable for outside director system originated from western countries. Chinese law culture distinguishes itself from that of the United States by its nationality and localization, in which living law is popular and hidden rules are prevalent. People admire power and neglect laws and regulations;they value results while devalue due process;they attach great importanceto corporation profits but despise individual rights. While Chinese organizational culture is typically characterized by autocracy, intimacy, approval, dependency, avoidance, affiliation, power admiration and non-competition, which is mostly the product of Chinese national culture. Through the survey of Chinese organizational culture and detailed analysis of the survey result, both top down and bottom up description clearly and soundly demonstrate that Chinese organizational culture does not dictate outside director system originated from the west. The key reason for the non-compatibility lies in the independency of outside directors and the features against independency in Chinese organizational culture. Based on theoretical analysis and investigation to Chinese national culture and Chinese law culture as well as the survey of Chinese organizational culture and survey description, we confidently draw the conclusion that current China is not the right place for outside directors. The transplantation of outside director system is a wrong action at the wrong time because current China cannot afford the right cultural environment for the growth of outside directors. It further argues that the transplantation of law should not be encouraged prior to careful study on and a detailed analysis of the various culture factors affecting the operation of the transplanted systems for what actually contributes to the success of law transplantation is the relevant cultural environment other than the economic system.