Comparison Study On Appointment And Removal System Of Independent Directors

Independent directors system is the core and major feature of governance system of British-US corporate. This system originated from US in 1930's and was gradually advocated worldwide after 1990's. The responsible securities administration organ which mainly represented by China Securities Administration Committee started to advocated this system in the end of last century and beginning of this century in China. Independence is the soul of the system of independent directors, while the procedure of appointments and removals is the key point to assure the independence of independent directors. Therefore, this thesis takes the appointment and removal procedure of independent directors as the research objects. By making comparison study of the appointment and removal system of independent directors between China and other countries, the author wants to discover the malpractice of the appointment and removal procedure in the system of independent directors at present in China and proposes reasonable suggestion on the development and perfection and the system in legislation. The thesis is divided into five chapters except foreword and conclusion. Chapter one is "independent directors, independence, appointment and removal procedure". The author mainly introduces in this chapter the definition and the present development status of the system of independent directors, the definition and connotation of independent directors and independence, the relation between appointment and removal system and the independence of independent directors. The author considers that the appointment and removal system of independent directors is the foundation to decide the independence of independent directors as well as the key point to decide whether or not the independence directors can make objective and independent judgment. Chapter two is "the author's design on the principle of appointment and removal system of independent directors". After analyzing the theory of corporation law that must be observed in the design of appointment and removal system of independent directors and the present governance status of listed company, the author believes that owning to the present status of the extremely tremendous controlling shareholder wantonly impairing the interest of minor shareholders, the design of appointment and removal system of independent directors should be based on the principle of "appropriately restrict and balancing the controlling shareholder so as to prevent them to abuse their rights in the appointment and removal process of independent directors"in order to achieve the goal of protecting the interest of corporation and minor shareholders. Chapter three is "the post holding qualification system of independent directors". In this chapter, the author makes a systematic discussion of the active and passive qualification of being the independent directors for a corporation. After making the comparison of the relevant system at home and abroad, the author concludes that the main feature of qualification system of independent directors in other countries, especially in British-US countries, is to restrict the relation between independent directors and manager staff. However, the author also considers that owning to the special situation of listed company in China, the passive qualification of independent directors should be focused on the restriction of the relation between insiders of company which include manager staff and the controlling shareholders instead of mainly focusing on the restriction on the manager staff in the corporation as it is now. Apart from the former conclusions, the author also considers that those people who have important dealing with the corporation and the insiders of the corporation should also be prohibited to be independent directors. Chapter four is "nomination and election procedure of independent directors". After making comparison study on the difference of nomination and election procedure of independent directors between home and abroad, the author considers that the present nomination and election procedure of independent directors is themain reason that causes the present situation of "non-independence"and "non-directors"for independent directors. Therefore, the author makes some proposals as follows: to make appropriate limitation on the nomination and election rights of the controlling shareholder so as to endow minor shareholders with abundant rights to speak in the election of independent directors; to make a complete introduction of entrustment system and accumulated voting system; to improve the convening method of shareholders'meeting which is to create condition for the shareholders'meeting through network as for now. Apart from that, the author strongly opposes the administration intervention during appointment and removal procedure of independent directors. Chapter five is "removal mechanism of independent directors". In this chapter, the author makes a systematic investigation on the reason and subject for the proposal of removal right of independent directors in other countries as well as the subject and just procedure on performing removal right. At the same time, the author also believes that the regulation on the removal of independent directors in our China is in a severe deficiency. Basing on the present situation that there exists extremely solo powerful controlling shareholder in our China, the author makes the following proposals: the abstract removal principle should be temporally suspended on removal right of independent directors under present situation and the removal right should be performed by the shareholders'meeting; the procedure should be just on performing removal right; to revise corporation law in an appropriate time; to introduce litigation mechanism of shareholder representatives so that, if necessary, the administration of justice could intervene to make legal remedies if the interest of minor shareholders is impaired.