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Regulator Solicits Advice for Requiring Independent Board Directors
The China Securities Regulatory Commission (CSRC) issued a guidance notice here Wednesday, soliciting advice from the community on the requirements of independent directors in companies listed on local stock exchanges, a move expected to improve corporate governance.
The notice says that all listed companies are required to hire independent directors, with the number accounting for no less than one-third of the total number of board members.
According to the notice, independent directors should be fair, given they have no personal interests in the companies. Therefore, personnel or relatives of personnel, shareholders, and service staff of the listed firm or related subsidiaries are not allowed to become independent directors.
Independent directors, which are selected by the board, are required to safeguard the overall interests of a company, and pay more attention to protecting the interests of small and medium- sized investors in particular.
The notice also spells out specific requirements for independent directors' personal behavior and integrity, their length of service, special rights, and earnings.
The CSRC requires that all listed companies restructure their internal systems and establish independent director systems by June 30, 2002.
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