Operationalising stakeholder governance: some lessons from China’s new Company Law

Abstract

The shareholder primacy model has come under increasing scrutiny in recent decades, particularly in light of climate change and other pressing global crises, with companies now expected to address the interests of a wider range of stakeholders. Stakeholder governance has thus emerged as a promising alternative model. While many jurisdictions are exploring pathways to advance more stakeholder-oriented governance models, the recent amendments to China's Company Law presents a particularly noteworthy example. This paper critically examines its newly introduced stakeholder-oriented provisions, including the mandated consideration of stakeholder interests, enhanced employee engagement requirements such as the implementation of workforce directors and adjustments to shareholders’ rights and directors’ duties. The paper analyses whether, and to what extent, these reforms represent a shift away from the shareholder primacy model as it was traditionally dominant in China. The paper makes two further contributions: first, it explores potential pathways for future reform to strengthen stakeholder-oriented governance in China; and second, it highlights lessons that can be learned to operationalise stakeholder governance for other jurisdictions.