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Policy recommendations for the effective implementation of the independent director system research

Author: HuangChengZheng From: www.yourpaper.net Posted: 2010-05-31 16:55:52 Read:
[Paper Keywords] legal system selection system of independent director system incentive and restraint mechanisms
[Papers Abstract] independent director system in listed companies is an important institutional innovation of the corporate governance structure, is an important measure to improve the corporate governance structure. China's listed companies has generally been the introduction of the independent director system, but the implementation effects become important concerns. From the independent directors of the relevant legal system construction aspects of the selection mechanism, incentive and restraint mechanism discussed how to strengthen the effective implementation of the system of independent directors for to improve and perfect the system of independent directors, is of great significance, and targeted policy recommendations to promote the construction of the independent director system.
In order to preserve and increase the value of state-owned assets, to protect the interests of minority shareholders, and out to improve the corporate governance structure considerations, the securities regulatory authorities in China learn from the successful experience of developed Western countries the introduction of the independent director system. But the independent director system in our country did not achieve the corresponding effect stakeholders to improve the efficiency of the company's governance, to protect the interests of property rights, an independent director to become necessary to improve the corporate governance structure of the system plays a vital role.
Speed ??up the construction of the legal system of independent directors
Since the implementation of the independent director system, departments and agencies have done a lot of work to establish and perfect the system of independent directors, has promulgated guidance on the establishment of an independent director system in listed companies, listed on the Shanghai Stock Exchange Corporate Governance guidelines and Corporate Governance Guidelines "and other laws and regulations, and the independence of the independent directors, qualifications, rights and obligations to make some provisions of the guidance, but so far independent director system is not yet formed and regulations on the mandatory. Of the Companies Act, the Securities Act, the relevant provisions are no independent directors, which makes independent directors in accordance with the law of exercise is extremely unfavorable. Due to lack of appropriate legal system support, the lack of specific, relevant provisions can be implemented provisions for the appointment, compensation, rights and obligations of the independent directors, are difficult to implement, to play the role of the independent director system where the impact. The perfection of the legal system of the legal system of independent directors from five main level approach: (1) modify the Company Law. To adapt to the new situation, and to promote the formation of the independent director system and healthy operation, should increase about the role of independent directors, the duties, rights, obligations, responsibilities and other legal provisions, these provisions is to formulate relevant the independent directors specific laws and regulations guiding principle; (2) to develop regulations by the China Securities Regulatory Commission and the Ministry of f1, the qualifications of independent directors, generator, comment on the program as well as pay provisions and the independent directors negligence investigated specify the administrative responsibility; (3 ) in the level of self-regulatory guidelines, should be the establishment of the independent directors of the industry self-regulatory organization. The self-regulatory organization can develop practice norms for independent directors and the bad practice of punitive measures. This increased industry self-regulation and guidance; (4) the articles of association of listed companies must set forth the exercise of independent directors and the role of the range of ways and methods.
Second, improve the independent directors selection mechanism
Should establish a separate, independent directors selection mechanism undisturbed. Independent director appointments mechanism needs to solve three problems: First, who will select the independent directors, the power of the main problems to solve select independent directors should ensure that the nomination rights of minority shareholders of the listed company to receive due attention; Second, how to choose an independent director, to solve select the specific procedures of the independent directors should ensure that adhere to an open, just and equitable principles, to avoid the independent directors do not have independence through legitimate channels; choose what kind of independent directors to solve the problem of the qualifications of the independent directors should be strictly provisions of the conditions of employment of the independent directors, to ensure that the selected person can sometimes ask, have the energy, the ability to effectively fulfill their supervisory functions. In the selection of the independent directors must adhere to the following three principles: First, to further protect the minority shareholders to mention it is not subject to management, but should also include excellent business ability.
Qualifications of independent directors of the China Securities Regulatory Commission publish guidance makes provision in order to ensure the actual operating results of the independent directors, the appointment of independent directors enough truly independent, with no significant stakes The independent directors. But our regulations, there are many imperfections, such as the board of directors of listed companies, the Board of Supervisors, individually or jointly hold more than 1% of the shareholders of the listed companies have issued shares can propose candidates for independent directors. This provision, domestic studies have shown that the relevant provisions of the system has been criticized for more. Independent directors and other directors, and ultimately for the election of the shareholders' meeting, its production process involves two parts: the nomination and election. Get rid of large shareholders control angle to consider the nomination links, you must set up an independent Director Nomination Committee, a member of the nominating committee should be all or the vast majority of independent directors. Consider using a cumulative voting system for the election of specific operating and avoidance system, cumulative voting system can guarantee can elect independent directors on behalf of their wishes, which require shareholders to vote in the election of directors of minority shareholders in the case of the lower stake can vote equal to the number of their shares multiplied by the elections the number of directors, shareholders can cast all the votes to a candidate or several candidates, the number of votes calculated separately for each candidate, elected more votes.
Third, improve the independent directors of incentive and restraint mechanisms
The incentives of independent directors in China is relatively simple. Incentives of independent directors, according to the economic view on economics, if you do not give or given less pay, the independent directors difficult to mobilize the enthusiasm. If given the remuneration of independent directors more easily so that it depends on the company's managers, thus losing its rightful independence. Therefore, we should pay attention to the level and form of incentive. However, the lack of effective constraint, even if the excitation intensity and motivation in the form of design, the effect is not necessarily good. Therefore, we must pay attention to the incentives and constraints of both. In China, as independent directors markets has not yet been established, the control over the market just at the initial stage of development, the the reputation incentive and control over the incentives of both incentives invalidity. No doubt, the economic incentive is more effective incentives. At present, the remuneration of the independent directors of listed companies in China, a fixed allowance system. However, empirical studies have shown that the independent directors' remuneration and company performance are not correlated. Compared with the pay levels of the independent directors of the Western countries, China's independent directors' remuneration may be too low, there is obviously insufficient incentives, it is difficult to fully mobilize the enthusiasm of the hard work of the independent directors. Some foreign companies to pay how much of the amount of labor according to the independent directors to determine their level of wages; non-cash compensation, stock options to independent directors, and such companies showed an increasing trend. Class of stock option remuneration encourage independent directors to the shareholders think, thereby reducing agency costs between the independent directors and shareholders, the total remuneration of the independent directors were also introduced a lot of variables. Combined with China's actual situation, can be fixed annual salary restricted stock options, its remuneration linked to performance of the company, and to stimulate the enthusiasm of their hard work. This form of remuneration to independent directors and corporate interests and the long-term interests of the independent directors at work, it is necessary to focus on the company's current operating conditions, but also concerned about the company's prospects for development. Most of the independent directors by the board of directors nominated by the relationship with high salaries appointment, so that oversight role and independence of the independent directors is being questioned. Therefore, should not be decided by the administration paid how much to pay in order to avoid the remuneration of independent directors with the company's short-term results, the independent directors of the company to generate undue sense of attachment.
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