Overhaul independent board director system

Updated: 2014-06-09 09:05

By Li Yang(chinadaily.com.cn)

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Government officials should not take second jobs as independent board directors for enterprises, says an article in Southern Metropolis Daily. Excerpts:

Nearly 200 listed companies have announced that independent board directors have quit their jobs this year. Most of those are government officials, who leave the posts under the pressure of central government rules banning civil servants from taking second jobs in listed enterprises.

In developed countries, independent board directors are responsible for supervising major stakeholders and senior executives, to prevent any abuse of power, in the interests of all shareholders.

However, the independent board director system functions differently in China. There are four kinds of independent board directors here, scholars, senior executives of other companies, professionals such as accountants and lawyers, and civil servants.

Statistics show that, by September 2013, 2,590 of 5,760 independent board directors had government backgrounds, accounting for 44.9 percent of the sampled total.

Moreover, some officials and college teachers work for several companies as independent directors at the same time. It is obviously difficult for them to be professional and independent for so many firms of various industries.

The Civil Servant Law and many other rules do not allow officials to take jobs in enterprises, because the second job will probably influence the fulfillment of their commitment to the public, and increase the possibility that civil servants may seek illegal profits from their involvement with the business.

Corruption by officials doubling as independent board directors also damages the normal market order and competition.

Having such officials quit their second jobs is not enough. Chinese companies also need to overhaul their independent board director system and find the right people to do the right job.