Thursday, March 5, 2015

Confucianism and the Hong Kong and Chinese Legal Systems

"The Intrinsic Value of Confucianism and its Relevance to the Legal System in Hong Kong and China"
Charles KN Lam and Say Goo
The Chinese Journal of Comparative Law
25 February 2015 (Advance Access)
Abstract: The objective of this article is to explore the intrinsic value of Confucianism and its relationship with the common law in the area of corporate governance and see how they can both work together to solve the corporate governance problems in China. In the course of analysis, we take a qualitative approach in adopting a case study to illustrate how Confucianism can be applied in the course of business management to address problems such as the appointment of board members, conflicting directorships, auditor independence, conflict of interest, corruption, and manipulation. We propose that the Western institution of corporate governance system can co-exist with Confucianism as the guiding compass for the direction of a company in Hong Kong and may have reference value for China.

Charles KN Lam and Say Goo
Journal of Financial Crime
Vol. 22, Issue 1, pp 37-47
Abstract: The purpose of this paper is to demonstrate how Confucianism can be applied in the areas that are now governed by company law in the common law system and how it can play a role in improving corporate governance. A gentleman in the context of Confucianism tends to be inclusive and broad-minded in embracing the interest of different stakeholders. In fact, he will balance the interests of shareholders and other stakeholders if there is any inherent conflict and try to achieve a win-win situation. Ultimately, he will run the company not just for profit-making but for social justice and commitment. The authors examine the leading cases in Hong Kong and the United Kingdom about the law of fiduciary duty and the duty of care and its relationship with Confucianism. In this respect, we review the teachings of the traditional Confucian texts and use Confucianism to fill in the gap where common law rules cannot reach. In addition, we adopt a comparative study approach in examining the law of directors’ duties in Hong Kong, China and the United Kingdom. It can be seen that the concept of fiduciary duty and duty of care is quite complicated and evolving and always subject to the interpretations of the court from time to time. For fiduciary duty, the term itself is quite conceptual and not immediately available to the general public. But loyalty in the context of Confucianism is a very lively and down-to-earth moral principle. Besides, fiduciary duty is imposed from outside, where directors had no choice but to accept. But loyalty in the context of Confucianism is something inherent and something from within. It is a moral principle that if you deeply understand the meaning of it, you will automatically accept it as a good virtue and your conduct will naturally be guided by such a principle. Confucianism can thereby be used to fill the gap where rules and regulations cannot reach. Confucian business ethics and common law rule should be complementary to each other in the development of a Chinese corporate governance system. This paper is the first of its kind in discussing the relationship between the law of directors’ duties and Confucianism. It argues that Confucianism plays a crucial role in guiding the behavior of the directors and can supplement the abstract principles of directors’ duties in the context of a Chinese corporate governance system.

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