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With regard to the enactment of true independence of the board of supervisors as well as the independent directors, the writer is of the opinion that, we should realize the fundamental obstruction rooted in these two systems ascribes to “internal person control” in the listed companies in China. Under the extremely strong powers of state shareholders, both the board of supervisors and the board of directors become a tool to carry out big shareholders’ willing. This unbalanced structure hampers the progress of good corporate governance in China. From the writer’s point of view, only a root and branch reform of the shares’ structure in Chinese listed companies, for example, reducing the controlling percentage of state-owned shares, can thoroughly improve Chinese listed companies’ corporate governance. However, it is unlikely to change the situation in the short term in consideration of a number of matters associated.
For the present, to meet the urgent need and ease the current tension, we should target at improving current laws and regulations from an active perspective. In detail, with regard to supervisory system, it is suggested that a change of supervisors’ composition should be made. The source of supervisors could be more diversified. For instance, creditors of the company should participate in the board of supervisors as members. Besides, special knowledge and expertise should be treated as a significant requisite when choosing supervisors. Improvement of supervisors’ remuneration is also an important element to be seriously considered.
There are two primary arguments referring to how to realize true independence of independent directors in China. The first viewpoint suggested that more laws and regulations should be set up to safeguard the independent director system; The second viewpoint supported by the well-known economist Wu jinglian is that system designing is not able to completely remedy the deficiencies of independent director system. Rather, by comparison, moral self – discipline of independent directors serves a more essential role in this regard. [FN11]
The writer maintains that both arguments are indispensable to reach the destination of real independence. On the one hand, legislation on independent director system secures the legal environment to acknowledge independent directors’ lawful rights. If independent directors are not independent, then their existence would be meaningless. More specifically, from the writer’s standpoint, the reform should focus on independent directors’ nomination, appointment, voting, remuneration. Moreover, to set new provisions such as to scale down big shareholders’ voting rights, or to confer exclusive rights on small and middle shareholders to nominate independent directors, may enhance the quality of independence. On the other hand, if all independent directors are dedicated to their work and fulfill their duties with due diligence and care, in the best interest of the company, then corporate governance is the most efficient at this point. Thus, it is significantly important to advocate independent directors’ self-discipline in our personal network valued society. It has often been suggested that life is a constant struggle between honour and inclination: that it is easier to do what one is selfishly inclined to do, rather than doing what is right and honourable. This attitude appears to resonate even more strongly throughout the corporate world. [FN12] We should cultivate advantaged corporate culture including good qualities of shareholders and management board, such as good faith, honesty and diligence. They are intangible assets of a company as well as an impulse of good corporate governance.
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