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Introduction of independent directors after the conflict and its impact on the structure of the Board

Author: XiePin From: www.yourpaper.net Posted: 2010-05-24 13:04:08 Read:
[Abstract] This article from the introduction of our independent directors after the status quo analysis of the conflict changes after the introduction of independent directors to analyze the impact of independent directors on the board structure, play to the positive effect of the conflict between the independent directors and inside directors to guide the conflict to the benefit of performance improvements to the direction of development, which is of great significance to the improvement of the corporate governance structure.
[Keywords] independent directors; conflict effect; impact

1 status of independent directors of listed companies in China

Independent directors, independent outside directors referred to other duties refers to is not in addition to directorships of listed companies, and the directors may impede the independent and objective judgment relationship does not exist and is employed by the listed company and its major shareholders. The system was originally formed in the United States, after promotion to the world. Officially listed companies in China in 2001, the introduction of the system, from our current source of independent directors of listed companies and the constitution of the overall situation of our independent directors has the following characteristics:
First, the structure, showing signs of deformity trend. Presents aging such as age; career presents a theory of rendering high-class; titles; qualifications presented high-end; equity presents trends zeroing; remuneration rendered rigid; sources presents non-equalization. Second, the independent directors still belonging to vulnerable groups. The principle of majority rule in accordance with the Board decisions upheld capital, so a small number of independent directors is difficult to play its proper functions and role. Third independent directors vases utility. Of independent directors of the equity is basically zero and pay showed rigidity characteristics, it is the long-term sustainable development and effective condition has had no effect, the income of the term of office of the independent directors, independent directors making corporate decisions will be based on career concerns and reputation of doublethink, and presented more as the tendency. The gradual increase in awareness of the risks of the independent directors, gradually enhance the sense of responsibility, but in the power of the Board of Directors in its non-equilibrium has not been completely changed, leading to the the sole director resigns phenomenon is gradually increased. This reflects the The independent directors diligent fulfillment difficulty gradually increased, but also reflect the increased risk of environmental forcings. Fifth, the strength of the association between the source of independent directors with shareholders, led to the independence and effectiveness of the play there is a big doubt. At present, China's independent directors recommended, appointment, remuneration and powers complete control in the hands of large shareholders. For related party transactions have a special right to veto vulnerable groups, because of its independent directors the basic chase for the attachment of the occupation, the impact on the reputation and interests, leading to its decision, it may be contrary to their professionalism and ethics in the wishes of the shareholders of the blind followers.

2 independent directors after the introduction of the conflict change and conflict positive effect

The introduction of independent directors will undoubtedly change the original decision-making of the Board of Directors, its final can be attributed to the so-called transfer of control over the shareholder, the resulting competition for control between shareholders conflicts and disputes, and thus the evolution of independent directors with the original There are contradictions and conflicts between the directors. Independent Directors as an independent decision-making body, the play of its functions must be formed between the former directors of tangible and intangible conflict. Specifically the following:
2.1 client conflicts of interest: the original directors of the principal corporate shareholders with larger shares, based on the profit and risk transfer perspective, to maximize its revenue. As virtual client - an agent of minority shareholders, the independent directors of their duties as far as possible, to maximize enterprise value and to avoid the erosion of the major shareholders of the interests of small shareholders. When the result of a decision-making behavior in favor of large shareholders to the detriment of the interests of minority shareholders, such a conflict will be inevitable.
A 2.2 role conflict: the role of the traditional board of directors of the Company to the supervisor, this should be the main role of decision-maker to become a secondary position. Combined with the composition of the Board is the main shareholder designation system, managers inseparable, thus forming the primary and secondary role reversal phenomenon. Introduction of independent directors is used to regulate the behavior of the decision-making of the Board, effective response to make the role of positioning. In other words, how to improve the efficiency of the Board's decision-making, scientific decision-making as well as the independence of the decision-making. However, differences due to the independent directors, with the original director, commissioned by the original directors still concerned about the excessive exercise its watchdog role, the inevitable result of the resolution of the independent directors to exercise the role of decision-makers, decision-making behavior is difficult to effectively unified, the resulting Board decisions efficiency is extremely low. Coupled with the inherent plot of the original directors of the original role, as well as man-made obstacles and interference, is bound to induce a decision-making role differences in conflict.
The positive effect of 2.3 after the introduction of independent directors of conflict: China's mandatory for listed companies must have independent directors, its fundamental purpose is to protect small investors, the board of directors to increase the voice of vulnerable groups. Therefore, the original intention of the introduction of independent directors is to protect the interests of small and medium investors in order to improve the performance of listed companies. Obviously, when the independent directors represent the interests of small investors, must be representative of the largest shareholder interests or the interests of the managers inside directors conflict, and the formation of such a conflict is inevitable, and indeed this article expected to have a positive effect:
(1) actual independent directors from the appointment of the largest shareholder or placement behavior caused by the loss of the company's development manager layer made for its own sake, dissenting vote against the board, this time from The manager layer inside directors form a conflict, but the conflict has a positive effect on the maintenance of all the interests of investors.
(2) independent directors to ensure their own reputation, very likely more inclined to let the company to fulfill its social responsibility, is conducive to business development managers or shareholders to make immoral decisions issued dissenting voices, corporate social responsibility, the protection of other stakeholders.
(3) due to a certain degree of independence of the independent directors, they to some extent on behalf of minority shareholders to voice detrimental to the largest shareholder raised an objection to the behavior of the minority shareholders, is conducive to the protection of the interests of minority shareholders.
(4) due to the different amount of information and expertise of independent directors and inside directors in the decision-making process, and make decisions in the same order to the company's long-term development goals, may also be the formation of the conflict, but the result of the conflict should be to promote democracy in the decision-making of scientific, toward conducive to maximize the shareholders' equity in the direction development should also be conducive to corporate performance development. The introduction of the three independent directors on the board structure affects

The board of directors represent the interests of all shareholders, is responsible for the implementation of the permanent establishment of the company's business, the company is also the major policies of the decision-making and implementing agencies. The work of the Board of Directors should include the task of the following six areas: leadership, strategy formulation and implementation; review of the company's internal control system; appointment of senior management of the company, to determine the reasonable remuneration policy, timely dismissal of senior management failed ; influence and oversee the formation of the company's dividend policy, maintaining the long-term interests of shareholders; determine the basic strategy of the company information disclosure, and oversight of company information disclosure process; oversee the company's restructuring activities, to ensure that the company's strategic development process in line with the long-term interests of the shareholders. Because of the late development of independent director system in China, the operation is not standardized, the irrational structure of the existing independent directors, is in a weak position, rather limited impact on the board of directors, but due to the independent directors and inside directors there are natural differences in the sources and functions of positioning of different decisions on the introduction of independent directors will inevitably have an impact on board structure.
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