The Independent Director System On Status Of Chinese Corporate Governance And Institution Perfecting

Corporate governance is the core issue of corporate institutional arrangements. From a legal point of view, the emergence of the Independent Director System (here in after called"IDS") is a measure to perfect the interests balance mechanism in Anglo-American model of corporate governance. IDS has established in the United States firstly. Due to it had a positive effect in American corporate governance, IDS have gradually adopted by other Anglo-American countries, and became a hit in reforming wave about global corporate governance in recent years. Many Continental Law System countries have also affected, IDS has been transplanted into their corporate governance. In order to improve our company's internal governance structure, reduce the interior agent control,IDS had also transplanted into our company governance in 2001. However, it exposes many problems in the localization process, especially in the IDS construct. To solve these problems, this paper which focused on the institution perfecting, tries to improve the legal framework of IDS to accommodate the actual conditions of China, and proves legal policy advice for IDS localization.Constituted by four chapters of this thesis, the main contents are described below:Chapter I is an overview of IDS. Firstly, I try to define the legal meaning of the independent directors, make a distinction between the independent directors and other directors in board of directors, and summarize the characteristics of independent directors; Secondly, two major patterns of corporate governance have been introduced. Internal defects in Anglo-American model in corporate governance structure—no special regulatory agency to supervise the company's operations,which is the root causes of IDS came into being; Thirdly, I analyzed the case that IDS practiced in the Common Law countries, and draw a conclusion that IDS played an active role in internal governance in U.S. companies, which is increasingly receiving attention and the proportion in board structure; Finally, IDS has infiltrated and disseminated in Civil Law Countries. In order to remedy the insufficient in company's internal supervision, Civil Law Countries have also transplanted IDS into their own country.The background and legislative practice of IDS transplanted into China has been detailed in chapter II. Firstly, the practice activities of IDS in Hong Kong , Taiwan has analyzed. Specifically, IDS has carried out earlier in Hong Kong, and played a positive role to China mainland to set up IDS; secondly, the background of IDS transplanted into Mainland has been in-depth analyzed. It is closely related to ownership structure lopsided and corporate governance unreasonable. "One dominated shares" may be deteriorated the internal corporate governance environment and internal governance structure unreasonable may be led to the board of supervisors out of its position; thirdly, I describe the legislative situations of IDS in Mainland. IDS transplanted in Mainland is an ongoing gradual process, from the company's individual behavior, to the Stock Exchange constraint, and finally to the state legislative regulated. But as a whole, the legislation of IDS is still at the exploratory stage.Chapter III detailed the practice of corporate governance of IDS in China Mainland. Firstly, from the performance study with IDS had carried out in listed companies in China Mainland, we found that most of the empirical research of IDS, which has implemented over the past decade, has shown not associated with the company's performance, or weak related with each other. This shows that IDS do not play positive impact in the performance of Mainland listed companies, and exists a huge gap between practice and theory; Secondly, from IDS deficiencies exposed in practice to analyze, we can see that independent Directors are difficult stand on their own both in personality and economic interests, and shortcomings also exist in their own. we also lack sufficient incentive and restraint mechanisms, which are affecting independent directors play the duties; Thirdly, as far as IDS legislative defects analyzed were concerned, we draw a conclusion that IDS has two major defects in legislation, one is legislative conflict existed between IDS and the board of supervisors in the oversight functions, the other is IDS of legislation and supporting regulations are extremely weak, and legislative conflict exist in upper law and lower-level law yet.Chapter IV is divided into five parts, which strive to perfect IDS Institution which could meet with our legal system. First, we should establish operating mechanism for IDS could smoothly implement, which need improve a selection mechanism of the independent directors, establish a scientific work mechanism for independent directors. Independence is the value of independent directors, and the most important factor in IDS operating mechanism design to avoid internal control. Therefore, the principle of independence should be consistent. Second, we should solve conflict between IDS and the Supervisory Board on corporate governance. In that way, we need to divide the character, content of supervision, methods of supervision and monitoring time both in IDS and the Supervisory Board, explicit a clear division in corporate Supervision between the two areas, and establish a co-ordination mechanism in both to ensure supplement each other. Third, improving legislations and regulations linked to IDS. In that way, we need as quickly as possible to remedy the defect of IDS form legislations, especially in civil and commercial legislation supplemented and the various rules and regulations supporting IDS, through which could detailed the essential factors which are selection of independent directors, work mode, exit mechanisms, safeguard measures, incentives and constraint mechanisms est. Fourth, we should establish a security system which could ensure independent directors perform their duties. This requires set the security system for independent directors which referring to legislations and regulation, funding and compensation mechanism, and the external environment protection est. could considered. In that way, we need set the terms to ensure funding for independent directors, guarantee compensation to the integrity, diligence independent directors when their interests harmed, cultivate the market of professional independent directors, and establish intermediary agencies about independent directors'guild and etc. Fifth, we should establish the incentive and constraint mechanisms of equal rights and responsibilities of independent directors. To the incentive mechanism, in short-term, we need to improve the remuneration incentives of independent directors, enhance pay levels and modify the pay structure, and change the condition remuneration of independent directors manipulated by controlling shareholders; in long term, we need to nurture manager market of independent directors to enhance the function of reputation incentives. To the constraint mechanisms, we need to built the trinity accountability mechanism which constitutes with tort liability, administrative regulations, and criminal legislation binding,and urge independent directors fulfilling their duties diligently, honestly and responsibly.