Research On China's Independent Director System

The independent director system originated in the 1970s in the United States and developed rapidly in the next 30 years. It has been formed to a more mature legal system. The practice proved that the independent director system has been an important part of management in American and European company. Its function is achieving the effective supervision to the operator by having the independent directors to prevent internal control and protect shareholders', especially the small and medium shareholders'lawful rights. Besides that, the member in the independent directors are almost experts in certain field, they can provide advise to the company for decision-making, so as to ensure the decisions of the company are all scientific and democratic. From China Securities Regulatory Commission issued《the guidance about building independent director system in the listed companies》on August 16th, 2001 indicated clearly in the form of department regulation that requiring the listed companies adopt the independent director system, to the article 123 in the new revised《PRC Company Law》issued on January 1st,2006: The listed companies set up Independent director, and the specific way should be confirmed by the legislation which enacted by State Council. It has been 6 years to try and explore constantly for that system. Although in theory and in practice there has been some success, but overall the independent director system in China is still in its startup and exploring stage. The theoretical research and empirical analysis are both not mature, and also weak in the legislation. Therefore, base on a great deal of information and data, this paper uses the methodology of comparison and empirical analysis to explore some issues in China's independent director system which require urgent solutions, and put forward some opinions about these issues. The innovation point of this paper is that besides indicating theoretical basis of China's independent director system, I also the combine with our own situation to discuss about the monitoring failure, the protection of vulnerable groups'interest and the protection of state assets. In addition, instead of the traditional paper structure and pattern, that is to say, in a chapter raise the problems, and give the solutions in the next chapter, I analyze each problem and give the solution in a chapter respectively so that the whole paper looks better-knit.In this paper, there are five chapters, as following:ChapterⅠ:Preface introduce the purpose and significance of China's independent director system , give a review of research done, and finally notes the methodology and the main ideas of it.ChapterⅡ: Theoretical analysis on independent director system and its practical significance. Mainly introduces the related theory review on China's independent director system, its system's body, rights, obligations and responsibilities, and state the significance of bringing the independent director system into China.Chapter III: Introduce the present status of independent director system in China from legislation and practice aspects and pointed out the problem it has now.Chapter IV: Talk about the independence of China's independent director system. Discussing about that the independent director system in China's has the system and cultural obstacles, and proposing the ways about how to strengthen the independence of the independent director system.ChapterⅤ: The relationship between independent directors and board of supervisors Through the analysis of the flaws of system, state that the responsibility of independent directors conflicts with the responsibility of the board of supervisors, then propose the advice of establishing the unique supervising pattern in China with the co-exist of board of supervisors and independent board of directors.