Research On Independent Directors' Function And Relevant Problems In The Corporate Governance In China

After independent directors'system was introduced to our country more than two years ago formally, it is meaningful to explore the function of independent director's system by reasonable and scientific methods .This paper analyses the current situation that our country implements independent directors'system, examines the impact of ownership structure and board composition on voluntary disclosure based on 117 samples of listed companies in China and investigates influence factors of the degree of earnings management using the cross-sectional data of 312 listed companies in 2003.Results show that independent directors'system has positive function of perfecting company's administration structure of our country and promoting company's standardized operation. According to the principle of alignment, this paper provides a math model to analysis the relation of increasing the number of independent directors and the efficiency of the supervision, drawing a conclusion that only when the quality of independent directors is very good, could the function of independent directors be enjoyed by the means of increasing the number of independent directors. Corporate governance scandals could be explained by the work of Milgram (1974) which shows human subjects to have an innate nature to obey legitimate authority. Other work reveals factors that weakening this nature include dissenting peers, conflicting authorities and distant authorities. This suggests that independent directors, non-executive chairs and committees composed of independent directors might induce greater rationality and more considered ethics in corporate governance. According to the theory and combining the reality of our country, this paper proposes the policy recommendations to improve independent directors'system of our country .