Research On The Coordination Problems Of The Independent Directors Regime And The Board Of Supervisors Regime In China

The corporate governance is a hot topic of recent years' discussions surrounding the corporate law. Because of the rapid progress made by American economy in the 1990s, great attention began to be attached on its corporate governance. In particular, the independent directors regime born in the U.S.A became the focus of global research on corporate governance. In 2001, China Securities Regulatory Commission formulated the Guidelines for Introducing Independent Directors to the Board of Directors in Listed Companies. From then on, the independent directors regime began to be officially introduced into China; the legal status of the independent directors regime was formally established in Company Law of the People's Republic of China (2005). In practice, the introduction of independent directors regime has played a certain role in the development and standardized operation of Chinese listed companies. However, because Chinese corporate governance structure is the model of two-tier board system, there is a permanent specialized oversight body—the board of supervisors in the company, the situation of coexistence of independent directors and the board of supervisors has been created in the governance structure of listed companies in China. These two different kinds of supervisory mechanism of managing the construction mode whether can keep both, how can keep both, is a worth pondering problem. The paper explores the reasons for the coexistence of two supervisory mechanisms, based on the institutional creation of the independent directors regime and the progress of its transplantation in the states which has established the board of supervisors, with the Chinese listed companies as its researching object. The complementary relationship between the function of independent directors regime and the board of supervisors regime finally decide the feasibility of coexistence of two supervisory mechanisms. The main functions of the independent directors and the board of supervisors both are supervision; there is a range of cross between the supervisory functions of two supervisory mechanisms. We only clearly position the functions of the independent directors and the board of supervisors; reasonably divide the power scope of the independent directors and the board of supervisors; harmonize the relationship between them, so that the independent directors and the board of supervisors shall give full play to their roles, and improve the corporate governance.The paper consists of four parts.The first part is to investigate the institutional creation of the independent directors regime and the history of its transplantation, then gave a brief on the building of Chinese independent directors regime. Independent directors regime (which was the internal oversight mechanisms) arose from the American mode of one-tier board system, accompanied by the phenomenon of the decentralization of shares. As an effective corporate governance structure, independent directors regime has become a worldwide trend. Many countries have actively introduced the independent directors regime. The supervision and balance of independent directors regime have been established as a fundamental principle of good corporate governance model by Western enterprises. Whereas, foreign independent directors regime can improve the corporate governance system, improve the ability to control, reduce agency costs, achieve the purpose of maximizing corporate value and the interests of shareholders, China officially introduced the independent directors regime in 2001.The second part is to analyze the reasons for the coexistence of independent directors regime and the board of supervisors regime. First, the paper points out that the situation of coexistence of independent directors regime and the board of supervisors regime in the model of internal supervision of Chinese listed companies, inevitably resulted from a series of internal and external reasons; especially analyze the reasons for the board of supervisors regime in our country failing to exert its own function of supervising and checking and balancing mainly on three factors—the obstacle of the traditional, legislation and system. Second, from the consistency of two regimes'objects and the complementarities of two regimes'functions, the paper exerts the method of functional analysis to demonstrate that the feasibility of coexistence of independent directors regime and the board of supervisors regime. Finally, the paper analyzes the positive effect of independent directors regime in China focused on its implementation only in listed companies.The third part is to investigate the performances and the reasons of functional conflicts for coexistence of independent directors regime and the board of supervisors regime. Two supervisory mechanisms which were born from two different models of corporate governance inevitably produce conflict, when they coexist within the framework of one corporate governance structure. Therefore, the paper analyzes the performances and the reasons of functional conflicts for coexistence of two supervisory regimes. The paper points out that because of the requirement of law and regulatory documents, there is a range of cross between the supervisory functions of two supervisory mechanisms. However, the problem is caused by inadequate legal provisions, conflict is not irreconcilable contradictions.The fourth part is to analyze how to coordinate the independent directors regime and the board of supervisors regime, based on the analysis of the various parts of the above. According to the legal provisions about the functions of independent directors and the board of supervisors, the paper points out that on the basis of the supervision function of the independent directors characterized by its internal, surveillance function anticipation, decision-making, soundness and that of the board of supervisors characterized by its outside, surveillance function afterwards, regularity, legitimacy, we shall clearly position the functions of two supervisory mechanisms; reasonably divide the power scope of the two supervisory mechanisms; harmonize the relationship between them, in order to realize the mutual mend of the independent directors regime and the board of supervisors regime and ultimately achieve the purpose of improving the corporate governance structure, and ensure the healthy operation of Chinese listed companies.