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Case Study

Industrial and Commercial Bank of China: The governance model

By Didier Cossin and Abraham Hongze Lu

14 pages

November 2012

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Reference: IMD-1-0335

This is a short version of case IMD-1-0327 Industrial and Commercial Bank of China: Governance Lessons from East to West. For more details, please refer to the full-length case. In June 1999, ICBC – the largest commercial bank in China – was technically bankrupt, with a nonperforming loan ratio of 47.59%. But, thanks to the united efforts of the government, the management team and its employees, the bank rose from the ashes through a transformation in its governance structure. After the third quarter of 2007, ICBC had continued to be ranked as the largest bank in the world by market capitalization, customers’ deposits and profitability. This case describes ICBC’s governance model, including the inner workings of the shareholders, the board of directors, the board of supervisors, the senior management team, the communist party committee, outside monitoring and discipline. The discussions are relevant to Western companies in terms of understanding the corporate governance structure adopted by large Chinese enterprises. The success of the bank and its unique governance structure bring much inspiration from East to West.

Learning Objective

At executive and board level, participants can focus on the banking governance structure and the pros and cons of the ICBC system. By the end of the class discussion, participants should be able to grasp the problems arising from conflicts of interest among shareholders, directors, supervisors, the management team, the communist party and regulators. They should also understand the inner workings of these stakeholders, in particular the incentives of each stakeholder group which differ greatly from those in the West. The discussions offer participants the opportunity to reflect on Western governance practices and borrow elements that could be useful.

Keywords

Governance, Banking, Banking Reform, Corporate Governance, Board Structure, Communist Party, Finance

Settings

China
2011

Type

Field Research

Available Languages

English

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