Directors’ duties in the context of Confucianism

Author:Charles KN Lam, S.H. Goo
Position:Department of Accounting, HKUST Business School, Hong Kong, Hong Kong; Faculty of Law, The University of Hong Kong, Hong Kong, Hong Kong
Pages:37-47
SUMMARY

Purpose - 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... (see full summary)

 
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Directors’ duties in the context
of Confucianism
Charles KN Lam
Department of Accounting, HKUST Business School, Hong Kong,
Hong Kong, and
S.H. Goo
Faculty of Law, The University of Hong Kong, Hong Kong, Hong Kong
Abstract
Purpose – 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 conict and try to achieve a win-win
situation. Ultimately, he will run the company not just for prot-making but for social justice and
commitment.
Design/methodology/approach – The authors examine the leading cases in Hong Kong and the
United Kingdom about the law of duciary 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 ll 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.
Findings – It can be seen that the concept of duciary duty and duty of care is quite complicated and
evolving and always subject to the interpretations of the court from time to time. For duciary 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, duciary 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 ll 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.
Originality/value – This paper is the rst 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.
Keywords Confucianism, Chinese business ethics, Confucian teachings of loyalty and faithfulness,
The law of duciary duty and the duty of care
Paper type Research paper
Introduction
In this article, we will 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
The current issue and full text archive of this journal is available on Emerald Insight at:
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Directors’
duties
37
Journalof Financial Crime
Vol.22 No. 1, 2015
pp.37-47
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-05-2014-0022

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