Power concentration and ownership : the special cases of corporate governance in Singapore and Hong Kong.

Abstract

This paper offers an explanation for the divergent corporate governance outcomes observed in Singapore and Hong Kong. As wealthy liberal market economies, often grouped with the USA and the UK in many economic and legal indicators, why have these states maintained concentrated corporate ownership structures unlike the widely dispersed ownership structures of their market economy counterparts? I suggest that concentration of power can offer an explanation. Though systematically very different, each small state has a contiguous set of actors among whom economic and political power, as well as corporate ownership, is highly concentrated. The reciprocal arrangements that exist counter dispersionary pressure both by discretely affecting policy creation or lack thereof, as well as by sustaining high barriers to entry in most industries. The economic and political dual roles of the powerful elites are explained using the joint product model. This model is used because both Hong Kong and Singapore have power so concentrated as to form a single actor that can create both a public good (infrastructure, stable politics, and so on) as a by-product of the private goods (profit and power) that they desire to create. In Hong Kong, the primary actor in this model is a group of wealthy tycoons that control pyramidal structures, collude to sustain their market shares, and influence the political system directly. In Singapore, the all-powerful state is the relevant actor. Analysis of legal and economic policies, as per Gourevitch and Shinn's 2005 work "Political Power and Corporate Control,' is also used to analyze the uniqueness of these corporate governance systems.