Conceptualizing Corporations and Kinship: Comparative Law and Development Theory in a Chinese Perspective

By Ruskola, Teemu | Stanford Law Review, July 2000 | Go to article overview

Conceptualizing Corporations and Kinship: Comparative Law and Development Theory in a Chinese Perspective


Ruskola, Teemu, Stanford Law Review


   There is only a perspective seeing, only a perspective knowing.(1)

   --Friedrich Nietzsche

   Ideas and ideologies shape the subjective mental constructs that
   individuals use to interpret the world around them and make choices.(2)

   --Douglass North

China is currently in the middle of a revolution: New political, economic, and social ideas are being introduced into the Middle Kingdom for the first time. Economic reorganization--which is currently spearheading the revolution--is taking place in tandem with the creation of a legal infrastructure to support market institutions. Except for some experimentation between the twilight of the imperial state and the triumph of Communism in 1949, the business corporation is a radically new legal transplant: It has no counterpart in the indigenous Chinese legal tradition. When the People's Republic of China enacted a Western-style Company Law a few years ago, world history was in the making.(3)

Although this story is familiar and intuitively appealing, it is incorrect, or at least wildly exaggerated. In this Article, I hope to convince the reader that even in late imperial China, there was a tradition of "corporation law," to use an admittedly anachronistic term. Conventional wisdom to the contrary notwithstanding, even before the introduction of European law in the beginning of the twentieth century, the Chinese operated "clan corporations," or relatively large commercial enterprises organized in the guise of the family. As part of the project of excavating this indigenous tradition, the Article also analyzes some of the ways in which the tradition continues to inform the understanding and operation of business enterprises in contemporary China.

In addition to correcting a long-standing oversight in comparative legal scholarship, the Article contrasts the Chinese story of corporate entities with those of American jurisprudence and speculates what role the different legal characterizations of corporation--and family--play in economic organization. Considered from the perspective of development theory, is today's transplanted Company Law likely to remake China's indigenous tradition of corporation law in the image of its Western models? Or will the new transplant remain simply an irrelevant effort at changing the course of Chinese history, as the native economic and legal systems continue along on their own paths? The Article criticizes both of these dominant views--the prophets of eventual convergence for subscribing to a teleological view of the nature of legal reform ("they" will become more like "us") and the divergence theorists for implicit cultural essentialism (law is simply another dimension in the clash of civilizations in a "West versus the Rest" world).

Of course, history matters, and no transplanted law can erase it by fiat; yet neither we nor the Chinese are merely prisoners of our legal traditions. For comparativists, it is important to get their picture of Chinese law and its history right, as this Article indeed sets out to do. However, when it comes to making policy decisions about the proper goals and methods of China's future legal development, those comparative insights have their limits. The precise ways in which transplanted laws will interact with indigenous traditions simply cannot be predicted with any degree of scientific accuracy. Yet one thing is certain: The baseline for any change is set by the indigenous traditions, and all intelligent policy analysis must begin with an informed appreciation of those traditions.

Corporation law has recently become the object of unprecedented cross-cultural scrutiny, and comparative corporate governance has emerged as a subfield in its own right.(4) There is an increasing recognition that corporation law is not simply a response to the classic "agency problem" inherent in any business association where the right to manage is severed from ownership, as suggested by Berle and Means:(5) Corporate governance is as much a function of industrial organization,(6) politics,(7) ideology,(8) and simply of historical accident,(9) as it is the means by which investors monitor those who control the corporation. …

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