On The Protection Of The Independent Director System In Listed Companies In China

The introduction of Independent Director into Chinese companies has positively helped to protect interests of medium-and-small-sized investors during the course of reform of listed companies. Independency is the foundation and soul of Independent Directors. However, the independency of Independent Directors is hard to be guaranteed in the practice of listed companies in China, which may be manifested from the perspective of nomination, power, incentive, and liabilities, etc. of Independent Directors. This is attributed to the irrational equity structure, weakness of the functions of supervisors, and monopolization of the state as a shareholder, which jointly lead to the control of a listed company by insiders. In this sense, the design of Independent Directors in listed companies needs to be improved. This thesis is intended to safeguard the independency of Independent Directors from the perspective of the design of Independent Directors, through comparative analysis and an inductive method. It consists of four parts. The first part introduces the basis of Independent Directors, including its fundamentals and its origin, development, and introduction into China. The second part summarizes the importance of Independent Directors in listed companies and explores reasons for the lack of independency of Independent Directors from examples of listed companies. The third part elaborates the limitations of Independent Directors in the practice in China and concludes to the necessity of taking reference from abroad through the comparison between foreign experiences in securing independency of Independent Directors and the practice of that in China in such aspects as appointment and removal, qualification, relationship with the board of supervisors, and powers, etc. of Independent Directors. The last part comes to the author's suggestions on guaranteeing independency of Independent Directors, such as laying down particular requirements for the removal of Independent Directors, investing Independent Directors the right to sue, etc. It is hoped that this thesis may be beneficial in the discussion of Independent Directors.