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A. The Essential Problem in China’s Public Corporate Governance
1. The appearance of the problems of publicly held corporate in China seem to be the same as those in other countries which have established the independent director system many years ago, such as the phenomena of “insider control”, the relevant transaction, the misleading disclosure of business information and the illegal behavior of the managerial staff, ect.
2. But the fundamental problem under the appearance mentioned above is completely different from each other.
In American, which is the first country to establish the Independent Director System in the 1970s, the fundamental problem of the public corporate governance is “insider control” caused by the highly scattering of the shares.
In China, the fundamental problem of the public corporate governance is the “de facto insider control rather than “insider control” in legal (ZHANG CHUNLIN and QIAN YINGYI)（13）. The problem caused by the concentration of shares not the scattering of shares, which resulted in the overlap of part of the ownership and the management, and also the conflict between large shareholders represented by the board of the directors (managerial staff) and the other stakeholders including the employees, the creditors and especially the small or the medium shareholders. 1) The problem of “One dominate share”（14）deprive the small or middle shareholders of the right to participate in the management of the firms through the only way—the assemble shareholders meeting because the largest share are so large that even all the rest of the shares added up can’ t overwhelm the largest shareholders’ decision in the voting procedure; 2) the large shareholders can make use of the meeting to make decision considering only their own interests at the price of the other stakeholders’ .3) Hence, the board of the directors selected by the large shareholders can’ t represent all the shareholders, and the conflict is between the large shareholders and the other stakeholders. What need to be supervised are the board of directors and other managerial staff who are representatives of the large shareholders, that is the large shareholders
B. Can Independent Director System Solve the Problem
Reason of Infeasibility of the Operation of the Independent Director System in China.
Although the CSRC released the Guidance and some scholars agree that China must introduce the System, in my opinion, the introduction can’ t solve the problem.
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