Study On Incentive And Constraint Mechanism Of Independent Director In China

The regime of independent director had fully developed in western countries, and plays an important role in company governance. The main function of the regime is to effectively supervise on the insider control within the framework of corporate governance, and to upgrade the decision making capability of the board of directors. China has been deeply affected by planned economy mechanism for a long time, the stock structure is unique, and the listed corporate companies in China always suffer from poor corporate governance mechanism and the interests of small stockholders are badly hurt, which affect the development of our country's economy. In order to consummate the corporate governance structure, China transplanted the regime of independent director in 1997. By now China has achieved a lot from the regime. Yet the regime fails to perform as well as it does in western countries. Some bad phenomena, such as controlling shareholder's bankroll, and manipulating market, occurs frequently, which does great harm to the development of capital market, and badly infringes upon the public investor's rights. In author's opinion, the main reason why the independent director can't carry out the duty properly is the default of the incentive/restrictive mechanism.The researchers and businessmen wonder how to make scientific design and necessary amendments in accordance with existing corporate governance mechanism and Chinese legal tradition. This dissertation researches the incentive/restrictive mechanism of the independent director, reviews relative theories and researches in China, and then submits concrete proposals in stead of superficial investigation and discussion. The author hopes this research will help to promote performance of independent director in China's listed companies.This dissertation includes seven chapters:Chapter I gives a whole view of independent director's incentive mechanism and restrictive mechanism. The author analyzes the meaning of incentive mechanism and restrictive mechanism. Because incentive mechanism is interdependent, permeate mutually, to link up mutually with restrictive mechanism. It is very hard to classify one mechanism into incentive mechanism or restrictive mechanism simply. The author will expound the mechanisms one by one.Chapter II discourses the independent director's qualification, appointment and dismissal mechanism. Whether independent director can accomplish the task endowed is decided by his technical skills and morality. It is necessary for the government to restrict the qualification, appointment and dismissal. This part is aimed at our country legislation defect, and tries to definite the qualification, engaging/withdraw procedure.Part III discusses the independent director's remuneration mechanism. Whether the independence of independent director can be guaranteed is crucial to realize the function of independent director. Economy independence is the intention of the "independent character". Independent director is "a reasonable economic man", and need payback according to the economy law and market law. Besides, the responsibility beared by independent director is comparatively big. The independent director must earn competitive reward. This part brought forward the remuneration mechanism plan.Part IV summarizes the independent director's reputation mechanism. The reputation is distinguishingly important to the independent director. There is a lack of credit mechanism in China. The reputation mechanism isn't set up. In this part the author give suggestions on how to set up the reputation mechanism.Part V analyzes the independent director professional committees and information providing mechanism. The author emphases the meaning of the mechanism, the reason why we set up the professional committees in directorate.Part VI observes the independent director's obligation and liability mechanism. This part includes content such as significance, and sketches how to perfect independent director responsibility system.Part VII dissertates the independent director's liability insurance mechanism. The author first demonstrates why we should set up the insurance, then lists the terms already possessed, and finally brings forward the concrete tentative plan on insurance system. In author's opinion, the incentive /restrictive mechanism of independent directors system in China will cover the following aspects: the independent director's qualification, appointment and dismissal mechanism (second part), remuneration mechanism (third part), reputation mechanism (fourth part), professional committees and information provide mechanism (fifth part), obligation and liability mechanism (sixth part), and liability insurance mechanism (seventh part).All the above mentioned is aimed to perfect the corporate governance, to improve the efficiency the board's works, to protect the investors. The dissertation will provide the referential material for the perfection of the regime of independent director.