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China to Require Independent Board Directors for Listed Firms
The Chinese stock market regulator is working on a set of rules that would require companies listed on local stock exchanges to hire independent board members, a move expected to improve corporate governance, a senior official said Wednesday.
Gao Xiqing, vice chairman of the China Securities Regulatory Commission, noted that all listed companies are required to establish an independent board of directors, with the number of independent directors accounting for no less than one-third of the total board members.
"The current system, which is run by a board of supervisors, usually big shareholders, wasn't working," said Dong Fureng, a renowned economist.
Insider control has seriously hampered the interests of small and medium-sized investors, and must be changed with the introduction of independent board members like scholars and experts, who are expected to play on a fair ground with no personal interest in the company.
Gao did not say when the new rules will be introduced, but emphasized that the government is serious about improving corporate governance. The rules will be first applied in fund management companies and later extended to listed firms and securities companies, he said.
The commission is also drafting regulations that will spell out requirements for independent directors' personal behavior and integrity, according to Gao.
Moreover, other aspects concerning corporate governance, such as information disclosure will also be stressed, to improve corporate accountability, he said.
A study conducted by the Shanghai Stock Exchange over the past three years found only eight independent directors among the approximately 3,000 board members surveyed.
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