Reform And Perfection Of Board Independence In China

One of the most fundamental changes of twentieth-century corporations was theseperation of ownership from control associated with substantially diffused shareownership. This seperation, together with the weakening supervision fromshareholders lead to " Insider control" affilicting the interests of shareholders. Againstthis background, Board Independence was introduced to counterbalance the powerabuse of the management.Under the direction of CSRC, Board Independence was compulsorily introducedto chinese listed companies. Controversy centering around Board Independence hasbeen never ceasing since the promulgation of the CSRC regulation on IndependentDirectors. Based on experience of the legally developed countries, this paper tries todeepen relevant research and make some contributions to the reform and perfection ofChinese Board Independence and comparative law is applied in the present paper.This paper consists of five parts.PART I is literature review, the aim of which is to review relevant literature onBoard Independence and making these literature a launchpad of this paper's research.Review regarding foreign literature is rather brief.PART II is origins of Board Independence and its development in China. Thispart analysed the relations between Board Independence and the protection ofshareholders interest by supervising the management and controlling shareholders, theunique institutional background of China and the path of the establishment of BoardIndependence in China.PART III is research on Board Independence in the US, most part of whichcenters on two widely influencial papers by professors Barnard Black and SanjaiBhagat. The points are twofold: higher proportion of Board Independence doesn'tnecessarily mean better company performance;some institutions hinder BoardIndependence in the US.PART IV is specific proposals on perfection of Board Independence in China. Inthis part, the following questions are explored. First, how to define "Independence";Second, how to ensure the selection of independent directors to be democratic anddiversified;Thirdly, how to reconcile the relationship between Board Independenceand the Supervisory Board;Fourthly, how to structure the duty, responsibility andincentive framework for independent directors.