Domestic listed companies would be required to have independent directors comprise at least one-third of their boards, according to a draft regulation published Wednesday to invite public comment by the China Securities Regulatory Commission (CSRC).
The move is aimed at avoiding insider control and protect the interests of all shareholders.
It is unclear when the proposal will be made permanent, but the public may comment before June 15 via e-mail to the Titan Law Firm at titanlawfirm@titanlawfirm.com.
Independent directors would be people outside the company invited to serve who have no relationship with major shareholders that would affect their judgment. At least one should be a professional accountant.
The independent directors would also bring fresh blood to the company, the CSRC said.
Candidates would be required to have at least five years of work experience in the legal and economic sectors.
Independent directors would be authorized to submit proposals, to gather general meetings of the shareholders, to recruit or dismiss accounting firms, to invite independent audit firms and to offer independent financial reports.
They are also free to give opinions on trade issues and staff management and to object to decisions that could hurt smaller shareholders.
Economists and small shareholders have demanded an independent director system.
The interest of all shareholders, regardless of size, should be a priority for corporate governors, economist Wu Jinglian said.
Though many domestic firms seeking public listings have restructured towards shareholding structures, the corporate boards remain overwhelmingly in the control of the state and major shareholders.
Wu said recruiting more independent directors to the board would help change the situation.
(China Daily 05/31/2001)
