On Practice And Issues Of The Regime Of Independent Directors

On October 27.2005, the long-standing committee of National People's Congress emended"corporation law", among which the 123th provision lists the notion of independent board in due form. The item stipulates that concrete methods of independent board are regulated by State Department. Thus , As a formal regulation, the provision of independent board is closely related to the management of listed corporations in China. Although the enforcement of independent director system is generally smoothly, it lacks the desired positive influence on the ultimate objective of this institution. As a standalone provision, independent director system cannot properly solve the problems of one dominate shareholder and of major shareholders being actual controllers in some public listed companies. And it cannot achieve the purpose of separation of the ownership and the operation.In practice, the origin background of our independent director system is different from the background of the country where this provision comes from. In practice this difference causes that the very foundation of this independent director system, independence, including independent objects, independent conditions, and independent status , cannot be maintained and achieved in corporate operation. Under the current corporate governance structure these issues cannot be addressed solely by the independent director system.So far, the legislature in China has included the provision of independent board in the scope of legislation. While before then, the provision of the independent board dominated by administrative power has been implemented on a large scale. It still remains many problems on the harshness of the introducing process, But under present circumstances, Only by perfecting the concrete methods regulated by State Department can we bring the provision into full play.