China's Listed Companies, The Independent Director System

With the implementation of Guidelines on Establishing Independent Director System in Listed Company issued by CSRC, China has stepped into a new stage to build its independent director system. This paper firstly explains the meaning of the independent director and reviews the development of the independent director during the past decade. To perfect the corporate goverance, Indepent Director System was introduced into the board of director by more and more listed companies in china. Designing a sound mechanism for independent director has become an urgent task to deal with.In China, the Corporate Goverance in most listed corporation is not perfect, the "majority shareholders control" and "insider controls" phenomena exist commonly. The restriction system has not reached perfection, especially, there are some faults in the structure of a board of director. At the same time , the board of supervisons governed by the insiders can't play an active role in the supervision system. So it brings about listed corporations irregularly run and their results in other questions which heavily endanger the development of the securities market. The controlling shareholders seize and inside executives and directors swindle assets from the listed company, thus leave the listed company emptied of assets and consequently impair the interests of minorities.Independent director have institutionally the following values: l)to be assisted to safeguard the rights of the owner of company, particularly the small shareholders; 2)to be advantagous to promote wholly thecapacity of company to make decisions; 3)to be beneficial to remedy the defects of traditional corporate goverance.In our country, Independent director system in listed company has met with many difficulties, for example: there is no law to abide by for independent director system; the duty and function of Independent director confronted with those of the board of supervisor; there is no incentive or abounding mechanism and even no exact right for independent director. All above lead the independent director system playing little role in the construction of corporate governance. It is necessary to perfect the independent director system which is required by the listed corporation recently in our country.On the basis of analyzing the defects existing in current situation, the author proposes possible suggestions on how to prefect the independent director system and to promote better practice of the independent director system in china.It is well known that even in some developed countries in the west, the independent director system is only a plan used to improve the management formation in a company while it is not a cure-all solution to all problems. The paper concludes that in order to present independent director system in right position, much work have to be done at the moment.