Corporate Governance Across Emerging Markets

For global investors and owner-managers alike, corporate governance in emerging markets is no longer a peripheral concern. It sits at the heart of capital allocation, risk management, and long-term value creation. China, Brazil, and South Korea offer three distinct but instructive governance stories—each shaped by history, ownership structures, and regulatory choices. Examined together, they reveal how governance frameworks evolve, where tensions persist, and what practical lessons can be drawn for investors and controlling families.

China’s corporate governance system has developed rapidly over the past three decades, largely in tandem with the country’s gradual transition from a planned economy to a market-oriented one. Early reforms in the 1990s focused on corporatizing state-owned enterprises (SOEs) and introducing stock exchanges in Shanghai and Shenzhen. Governance in this phase was heavily state-centric: boards existed, but real authority often rested with government bodies and Party committees. Over time, China introduced a modern company law, independent director requirements, audit committees, and disclosure rules broadly aligned with international practice. Today, governance is shaped by a dual structure. On the one hand, the China Securities Regulatory Commission enforces listing rules, disclosure standards, and corporate governance codes similar in form to those in developed markets. On the other hand, the State-owned Assets Supervision and Administration Commission represents the state as controlling shareholder in major SOEs, influencing board appointments, executive incentives, and strategic direction. For a major investor, the opportunity lies in China’s scale, liquidity, and improving transparency; the risk lies in understanding that control rights, political priorities, and shareholder value do not always align in the same way as in Anglo-American markets. Effective due diligence therefore requires not only financial analysis, but also a clear view of ownership, state influence, and regulatory signaling.

Brazil offers a contrasting governance journey, one driven less by the state and more by capital market innovation. Historically, Brazilian companies were characterized by concentrated ownership, extensive use of non-voting shares, and weak minority protection. In response, Brazil’s stock exchange introduced differentiated listing segments, most notably Novo Mercado, which raised governance standards beyond minimum legal requirements. These reforms demonstrated that better governance can be market-led and value-enhancing. One particularly relevant lesson from Brazil for family-owned enterprises is the role of structured family governance mechanisms, especially the family council. For a large family company now owned by two generations, a family council can serve as a formal forum to separate family matters from business management. The benefits include clearer communication across generations, agreed principles on dividends, succession, and employment of family members, and reduced risk of conflict spilling into the boardroom. It also helps professionalize decision-making without diluting family control. The costs are real but manageable: time commitment, the need for facilitation or external advisors, and the risk that poorly designed councils become symbolic rather than effective. The Brazilian experience shows that when family councils are clearly mandated, linked to but distinct from the board, and focused on long-term stewardship, they can significantly enhance both family harmony and corporate resilience.

South Korea illustrates yet another governance model, dominated by large business groups known as chaebol. Many of the country’s most prominent listed companies—such as Samsung Electronics, Hyundai Motor, and SK Hynix—are globally competitive firms with sophisticated operations, yet their governance has long been shaped by founding-family control. Samsung Electronics provides a useful example. It has strengthened formal governance practices over the past decade by increasing board independence, separating the roles of chair and CEO in practice, enhancing disclosure, and engaging more actively with international investors. At the same time, ultimate control remains closely linked to the founding Lee family through ownership structures and influence within the wider Samsung Group. This creates a hybrid governance model: outwardly aligned with global best practices, but internally anchored in family and group control. For investors, the key insight is not to assume convergence automatically means convergence in substance. Instead, governance must be assessed in terms of how effectively boards can challenge controlling shareholders, manage succession, and balance group interests with those of minority investors.

Taken together, these three cases underline a central theme in emerging-market governance: form is converging faster than substance. Codes, committees, and disclosure frameworks increasingly resemble those of developed markets, yet underlying power structures—state ownership in China, family capitalism in Brazil, and chaebol control in South Korea—continue to shape outcomes. For investors, this means governance analysis must go beyond box-ticking and focus on who really controls strategy and capital. For owner-managers, especially in family firms, the lesson is equally clear: well-designed governance mechanisms such as family councils and independent boards are not constraints, but enablers of continuity, credibility, and long-term value creation.