Petrochina Case Study

10/04/2012

Case 1 - PetroChina

Name : 康依荻

In order to open its capitals to foreign investments, a company needs to attract investors and cheer them about their interest. And to do so, it might not only provide good and promising financial statements, but also be in accordance with the international regulations concerning companies’ management and governance. But there are still some important criteria that shareholders could considerate, both internal and external criteria. By internal criteria, we mean every aspect of the company’s structure that could influence its result in the future, such as the shareholders and capital structure, the transparency of the information provided, the organizational culture, and so on. The external criteria are mainly the economical and political environment of the country in which the company is incorporated, the legal system and all the regulations regarding foreign investments. Thus, with the important growth of its Oil and Gas industry and then of its economy, the Chinese government felt the need to raise foreign funds. So started from 1978, China saw the necessity of bringing some reforms to the corporate governance of its state-owned enterprises (SOEs). In fact, the Society of Mainland China is led by the communism; its economy has then a state-owned structure. That induces a strong participation of the government in the management of enterprises. It’s illustrated by the legal ground provided in the Enterprise Law to local party committee to play an active role in companies’ decisionmaking. However, the government should have a function of regulator defining legal and institutional environment for the companies to be effectives and competitive. So while the international standards require the separation of ownership and management, the government in China used to appoint managers to the SOEs who will serve its political purposes. But the interference of the government in company’s affairs is not necessarily bad....