Chinese Corporate Governance And Legislation Option: Rationality Of Independent Director System

Due to a series of problems arising in corporate governance, the independent director system was introduced into China in 2001, which has aroused wide discussion, and now we are sure that the previous Chinese corporate governance system is not sound regardless whether the introduction itself was proper or not. Three years after the introduction, when we pay attention to the problem again, we can not yet decide to what degree the independent director system rooted from America corporate governance system will benefit us. My view is that although the contributing factors under the disadvantaged corporate governance condition of China are very complicated, we ought to try to find the key trying point to guide us to the right way. The corporate governance is the governing structure focus on modern corporate, and the latter is the center of the governing structure, so it is based on the understanding of modern corporate system that we can grasp the main features of modern corporate, namely the separation between ownership and management and corporations' more social responsibilities. Modern models in corporate governance, through imitating the political idea of separation of powers control the powers within corporate. Different countries, due to different background of economy, politics and culture have adopted different forms of corporate governance system, which cannot be simply classified to be better or worse. Comparing modern Chinese corporate features with the present governance form, I try to find the key problem to solve first.The solid triangle of powers among the stockholders meeting, the director board and the supervisory board is the ideal form of corporate governance, within which the three parties can both perform their duties and supervise each other. The common condition that the state holds the overwhelming share of stocks results in the fact that the director board possesses too much power within the corporate to be well supervised, and forms the different kind of insiders' control from the westerners'. I think it fits Chinese condition to introduce independent director system to control the excessive power director board owns from the inner side of it instead of enforcement of the supervisory board from outside, and at the same time, this form reminds us of the nature of independent director system in China that the legal transplantation is not the complete denial of the function of the supervisory board but the inner improvement of the director board. The form corporate governance China has chosen still belongs to the traditional continental legal system one which includes the shareholders' meeting, board of director and supervisory board to form a two-level control.At the same time, we must be conscious of the limitation of independent director system and pay effort to reduce negative affection along with the transplantation between different legal systems. The newly transplanted independent director system is no cure-all medicine. The first thing we should do I think is to make clear the purpose of the legal transplantation and the functioning coverage of independent directors, which should not go out of the director board and beyond the supervisory board, so that we can improve the relationship between these two supervising institutions and help form the advantage of mutual functioning.