Independent Director System In China Is Rethinking

The public listed companies in China always suffer from poor Corporate Governance Mechanism and the interests of the medium and small stockholders are hurt. In order to regulate Chinese securities market, ensure the interests of the medium and small stockholders, further improve the governance structure of listed companies, standardize their operation, China Securities Regulatory Commission (CSRC) formulates the Guidelines for Introducing Independent Directors to the Board of Directors in listed Companies. All domestically listed companies shall make necessary amendments to the articles of association in accordance with the requirements set in the Guidelines and appoint qualified persons to be independent directors. At least one of the independent directors should be an accounting professional (refers to personnel with senior professional title or certified public accountants). By June 30th, 2002, at least two members of the board of directors shall be independent directors; and by June 30th, 2003, at least one third of board shall be independent directors. But the implementation of this institution has not been very satisfactory so far due to some problem such as laws, regulations, independence of independent director, incentive and restriction mechanism.This paper analyzes the function of independent directors and proposes the further theoretical strategies and suggestions on the basis of research of many researchers. The paper includes five parts. The first part introduces the definitionand the process of generation and development about the independent director. Thesecond part points out the reason for the implementation of the independent systemin China. In the third part, the author analyzes the implementation effect of this system on Chinese public listed companies. In the result, the institution of independent director cannot take effect in Chinese public listed companies. The fourth part analyzes the cause which the institution has no effect. In the last part,the author put forward own advises about how to improve the efficiency of the system in allusion to these causes.