Political Background Of Independent Directors And Corporate Performance

This article dicussed the relationship between the political background of independent directors and the corporate performance. Not only is the independent directors' political background chosen to be discussed, but also the quantity, percentage and political level are analyzed to bolster the research. Consequently, it is easily to draw the conclusions as follows:1. Practically, over 53% quoted companies have more than one independent director. However, it is not uncommon for these independent directors to have political background, less than one person for per company equally. Only 23.33% independent directors have political background, which surpass the result that scholars have made before, expressing that corporate companies in China having increased the awareness of independent directors background, with the hope of getting the support of government. When we analyze the impact of different level, we can find that only 5.62% corporate companies have independent directors of natural level. Conversely, the independent directors that have the political background of municipal level and county level is higher, approximately 17.45%. The province level and municipal level arrive at 11.25% and 5.5% respectively. The county level only reaches to 0.7%.2.The independent director has political background can't promote the corporate business that much as reported before. The background of independent directors doesn't mean that the higher political level, the better marginal profits. Meanwhile, a high percentage of independent directors don't point to an awesome profit. Actuality, the relation between the corporate profits and independent directors is a model of U. Specifically, the corporate profits will increase along with independent directors' amount and percentage. However, as soon as these factors peak at certain statistics, the marginal profits will descend. Further research illustrates that the corporate marginal profits can be maximized when the percentage and quality of independent directors having political background, amount to the level between 50% and 60%, are suitable to the development with the business of companies.Based on the research, the article proposes the solutions as follows. To start with, It is imperative to establish the system of versatile independent directors. Secondly, the company is supposed to draw on the first lead independent director institution. Then, setting up the platform of independent director communication is also needed. Consequently, modifying the stimulating system, strengthening the training for independent directors and consummating the surveillance system should be adopted.