After the first trial of the Kangmei case fell, there was a wave of “resignations” for independent directors of A-share listed companies (hereinafter referred to as “independent directors”), which also put the independent director system on the cusp.
This year, it coincides with the 20th anniversary of the birth of my country’s independent director system. The change in the occupational ecology of independent directors triggered by the Kangmei case reveals what problems with the independent director system? Is there still a need for an independent director system? If it continues to exist, how should reform be done next? The reporter interviewed Watson, the vice chairman of the China Society for Economic System Reform and former independent director of Vanke.
Wason has been engaged in theoretical and policy research on economic system reform and economic and social development for a long time. It is the three major changes that have affected my country’s economic system reform process: the dual-track price system and the creation of a state-owned asset system. , One of the main proponents and promoters of the non-tradable share reform. At the same time, Watson used practical actions to give a profound interpretation of the role that independent directors should play in the 2016 “Battle of Ten Thousand Thousands”.
In Watson’s view, the first-instance judgment in the Kangmei case played a huge positive role in promoting the resolution of the issue of the independent director system, which is a good thing. Otherwise, it is not impossible that the issue of the independent director system will not receive attention in another 20 years.
Watson pointed out that at present, independent directors of A-share listed companies have become a “vase”, which is not unrelated to the independent director generation mechanism. The independent directors of A shares are more “selected” by major shareholders. Therefore, the independence of independent directors has been a big question mark from the beginning. On the other hand, a large part of the responsibilities of independent directors is to supervise major shareholders and management. “The person invited to supervise the person who invited him”, and regardless of the personal qualifications of the independent director, it is destined to be more difficult to perform the supervisory duties normally, and it can even be said that there is some “fantasy”.
“To be honest, I have served as an independent director for two terms at Vanke for a total of 6 years. Among them, the first 5 years are actually the same as most independent directors. Basically, I didn’t do anything, because I really didn’t have anything to do. I’m not Monkey King either. It’s hard to see what is behind the documents at a glance when I look at the meeting documents before attending the board meeting. So, for the first 5 years In time, I was basically a “vase independent director”.” Watson said frankly.
Wason believes that the four independent directors of Vanke in the “Battle Wanke Competition” in 2016 can exert tremendous energy. Watson believes that it has its own uniqueness. On the one hand, Vanke’s independent directors were more responsible. On the other hand, it was Vanke’s shareholding structure, which was a very few companies in the Chinese stock market that had the characteristics of “diversified shareholdings”.”” situation.
” Objectively speaking, if Vanke’s major shareholders had the absolute right to speak, then even if I or someone else was brave, they would not be able to perform well. The corresponding role of the independent director. “Watson said with a smile.
As for the independent director system, Watson believes that after 20 years of testing a system, we can basically see a lot. In the past 20 years, independent directors The “voice” of “contheight” has always been low, which is the case in most companies, most periods, and most places.
“Although we cannot say that the independent director system In the past 20 years, it has not worked at all, but it has only remained at the level of increasing the vision of the company’s directors and providing them with some information and advice. It can be said that it stays in a state of’opening a book is beneficial’. The independent director system really plays a big role in the development of listed companies, which is rare, and it needs many specific conditions to realize it. “Wason said.
Regarding the preservation and abolition of the independent director system, Watson said that he is currently inclined to revise the “Company Law” to abolish and redesign the independent director system. The point of view of the institutional structure of corporate governance. When my country introduced the independent director system, due to historical limitations, the function and operation of the securities market was not well understood, so the national conditions in the independent director system were not paid enough attention.
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“Independent directors are the’majority’ in overseas listed companies and play a leading role in the board of directors. Independent directors of domestic listed companies, as the ‘minority’ and ‘outsiders’ of the board of directors of listed companies, are difficult to play a role. “Wason said.
Wason further pointed out that if the independent director system is fundamentally reformed, two aspects are worthy of attention. On the one hand, it may modify and cancel the “Company The regulations on independent directors in the Law, or the need for further institutional provisions to clarify how independent directors should be produced, what duties should be performed, and the corresponding terms and conditions for independent directors, etc., to study whether these remedies and reforms can be Solve the problem. On the other hand, it is necessary to pay attention to the role of the board of supervisors. In this discussion of independent directors, the issue of the board of supervisors has been ignored and it can be said that it should not be an omission.
The following is an interview with Watson by a news reporter (with some editing):
News: In the Kangmei case, a verdict was pronounced in the first instance recently, and 5 independent directors (hereinafter referred to as “independent directors”) were sentenced to bear huge joint and several damagesresponsibility. At present, the incident itself and its impact are continuing to ferment. What do you think of this incident?
Watson: The first-instance judgment in the Kangmei case has caused a large response from all parties in the market, which should be said to be predictable.
On the one hand, the judgment changed the previous perception of the risks and benefits of the position of independent director. This is the most direct reason. On the other hand, while revealing the risk of independent directors’ appointment, it promoted people’s in-depth thinking about the problems of the independent director system.
In this regard, although the first-instance judgment in the Kangmei case is not perfect, or the specificity of the judgment can be further studied. But on the whole, the judgment has played a huge positive role in promoting the resolution of the issue of the independent director system, which is a good thing.
Otherwise, it is not impossible that the independent director system will not receive attention in another 20 years.
News: At present, most independent directors of A-share listed companies are generally paid around 100,000 yuan a year. Do you think that Kangmei independent directors have undertaken joint and several liability for compensation of 100 million yuan, which is unjustified?
Watson: This question needs to be viewed from multiple angles.
In terms of legal principles, the judgment is based on the punishment of all directors in accordance with the “Company Law”. As a member of the board of directors of a listed company, independent directors are required to bear legal and economic responsibilities for major violations of the law.
At the same time, the legal aspect of the responsibilities that an independent director should bear is not based on his income as the criterion of punishment. In the first-instance judgment in the Kangmei case, the accounting firm and the signing accountant were sentenced to bear 100% joint liability. Therefore, it is not to say that “taking less money” means less responsibility and less responsibility, but to look at the harm caused by related malfeasance or abuse of power.
It can be said that the distinction of responsibility has been considered in the sentencing of this sentence. Not only the independent directors and other staff members, but also the joint liability of different independent directors are distinguished among the members of the independent directors.
Therefore, from a legal point of view, it cannot be said that the relevant independent directors were wronged. Can onlyIt is said that they do have certain responsibilities, and at the same time, as individuals, there are also misfortunes. From their personal point of view, some further appeals can be made.
At the same time, from the perspective of international practice, although independent directors are rarely held accountable under normal circumstances, when there is a major financial fraud such as Enron It is also difficult for independent directors to stay out of the matter. And Kangmei Pharmaceutical, to some extent, can also be said to be a reduced version of “China’s Enron”?
Of course, from another perspective, that is, under the structure of my country’s independent director Between “should” and “can it”, it should be said that there are still major issues worthy of study.
News: Nowadays, “Vase” is the first impression many people have of independent directors. You have also mentioned: “In the thousands of listed companies in the A-share market, there is almost no voice of independent directors. The independent director system, as an important part of the corporate governance of listed companies, does not play a real role. It seems that why the Independent Dong became a “vase” step by step?
Watson: To clarify this issue, we must first return to the mechanism of independent directors.
Independent directors of listed companies refer to those who do not hold positions other than directors in the company, and their absence from the listed company and their major shareholders may hinder their independence and objectiveness. Judging the relationship of directors. In layman’s terms, that is, independent directors have nothing to do with the major shareholders and management of listed companies.
However, the A-share independent director system stipulates that major shareholders and management nominate independent directors. When the major shareholders are “selecting people,” the independence of independent directors has already raised a big question mark.
At present, whether an independent director is “independent” is mainly based on whether it has an apparent statutory connection with a listed company. But a person’s best friend is often not in the unit. Some “independent directors” who have a particularly good personal relationship with actual controllers or major shareholders, can it really be said that they are not related to listed companies?
On the other hand, a large part of independent directors’ responsibilities is to supervise major shareholders and management. However, it is difficult for the independent directors “picked” by the major shareholders to perform their supervisory duties.Night Tan”.
Under this institutional arrangement, objectively speaking, “the person invited to supervise the person who invited him”, and regardless of the individual director What is the qualification, it is destined to be more difficult if it is to play a great role in the job.
Therefore, there are thousands of A-share listed companies. The number of independent directors who are named as independent directors has huge direct and indirect costs each year, but they have not played a significant role. The majority of independent directors are criticized as a “vase” phenomenon.
News: You have also served as an independent director. Have you encountered any “pain points” or “difficulties” in the performance of independent directors?
Watson: It is a natural right for an independent director to participate in board meetings during the performance of his duties. However, for each listed company, the number of board meetings in a year is relatively limited, usually within 10 times. At the same time, the resolutions of the board of directors need to be announced, so the content of the meeting is more formal, such as quarterly reports, annual reports, etc.
Based on my experience as an independent director, the relevant announcements that the majority of investors have seen, the independent director is basically at the meeting or a few hours or days in advance. See. If there are hidden problems, it is unrealistic for independent directors to find out the problems that all parties in the market, including institutional investors, cannot study carefully after the announcement is made.
At the same time, in terms of institutional arrangements, in addition to participating in the board of directors, there is no requirement to pass independent directors for other matters. In addition, independent directors are generally part-timers. The work of independent directors is not much in daily life.
In general, although independent directors are required to work for at least 15 days in a listed company a year, there is no system that stipulates that the independent director’s food and lodging within these 15 days Who pays and guarantees the relevant working conditions. If a part-time employee must work in a listed company 15 days a year, and scold the independent director to discover the potential problems and “sickness” of the listed company, I am afraid it is not realistic.
To be honest, I have served as the independent director of Vanke for two terms for a total of 6 years. Among them, in the first five years, like most independent directors, they basically “do nothing” because they really “do nothing.”
I’m not Monkey King either. It’s hard to take a look at the meeting documents before attending the board meeting.See what is behind the file. Therefore, the first 5 years was basically a “vase independent director.” However, I did not take any money from the company when I was an independent director of Vanke, so I can comfort myself somewhat. If the independent director does not hold a meeting, basically no one can see anyone, so I really don’t know if other people do more.
News: In the 2016 “Battle of Ten Thousand Thousands”, four independent directors, including you, influenced and changed the development direction and process of the entire event through public announcements and voting. Why did the four independent directors, including you, exert so much energy at that time?
Watson: Objectively speaking, Vanke’s independent directors, including me, were able to play a role at the critical moment of corporate development, which was unique.
At that time, Zhang Yundong, the then head of the Shenzhen Securities Regulatory Bureau, strongly invited me to serve as Vanke’s independent director. I agreed to serve as the independent director of Vanke only after special circumstances including the particularity of the shareholding structure. Vanke is also the only listed company where I have served as an independent director. Therefore, my independent director was neither requested by the major shareholders nor by the management, and I do not know them.
On the one hand, Vanke’s shareholding structure was indeed a very few companies with the characteristics of “diversified shareholding” in the Chinese securities market at that time. Only a few ten percent, plus management’s shares and institutional investors, the board of directors should be said to have formed a “three pillars” situation of major shareholders, management, and independent directors.
On the other hand, it is also inseparable from the independent director who served at that time. However, objectively speaking, if the major shareholders had the absolute right to speak at that time, even if the independent directors were independent and responsible, they would not play a big role.
Therefore, the decentralized characteristics of Vanke’s equity was the prerequisite for independent directors to play a decisive role when the company encountered crises and problems.
News: You once said: “The independent director system is an imported product to China, but we have lost some of its essence in the introduction.” Although everything returned to silence after the “Baowan Controversy” , But after the first trial of the Kangmei case fell, a wave of “resignations” appeared in the independent directors of A-share listed companies, which triggered the market’s long-term attention and thinking about the independent director system.It seems that at the beginning of the introduction of the independent director system, what were the problems?
Watson: Generally speaking, the structure of listed companies in the West is different from the structure of listed companies in China. Among them, the most typical feature is the decentralization of equity.
Western listed companies rarely have large shareholders with particularly high shareholding ratios. Therefore, as a product of long-term development and evolution, the demand for the independent director system has arisen. And developed the relevant system rules of independent directors.
At the beginning of the establishment of my country’s securities market, we learned a lot of overseas market experience, accelerated the pace of construction, and made many detours. However, although there are many common laws in the construction of the securities market, Chinese listed companies are basically controlled by large shareholders, which is similar to the situation in overseas securities markets in the early 20th century. This is completely different from the background of the gradual emergence of the independent director system after the large foreign listed companies gradually evolved into a market structure with dispersed equity after the middle of the 20th century.
Therefore, when the major shareholders have the final say, how the independent director system will work has faced difficulties from the beginning. In overseas markets, the board of directors of many listed companies has a majority of independent directors, and the directors are nominated by independent directors. This is basically different from the actual situation in China. Therefore, the huge differences in national conditions have destined from the very beginning that the domestic market does not have the “soil” for the development of the independent director system.
If the independent director system of others requires independent directors to have a majority in the board of directors, independent directors should elect their own independent responsible persons, and hold regular independent director meetings without the participation of outsiders, The essence of the rules of the independent director system, such as the management meeting attended by the core executives of non-listed companies, is held at least twice a year.
However, we must have discarded a lot of the essence of the overseas independent director system. Different.
News: Up to now, the A-share independent director system has gone through 20 years. During the 20 years of practice, have you had any impressive incidents regarding the independent director system?
Watson: To be fair, the independent director system has played a small role in 20 years. In most companies, most of the time, most of the timeThis is true in different places. The “voice” of the independent director has not been loud.
It can be seen that the independent director system has not changed much in the past 20 years, which also reflects the phenomenon of “path dependence” from the side.
However, it cannot be said that the independent director system has no effect at all. Some external independent directors participate in the board of directors, and the opinions expressed and put forward will increase the vision of the company’s own directors and provide them with some information and suggestions.
There will always be gains in communication, and more gains are less. However, it may be in a state of “opening a book is beneficial” to a certain extent. This can actually be achieved by inviting consultants and often inviting experts to hold consultation meetings. The independent director system really plays a big role in listed companies, which is rare, and it needs many specific conditions to realize it.
News: You have also said that “independent directors do not have much effect, but they are more or less a channel for the major shareholders of listed companies to arrange for their own external friendly relations to share benefits. This kind of name is not real and costly. Unlike plagiarism and imitation, there is still a question of whether it is necessary. At present, there are also many voices in the market for abolishing the independent director system. What do you think of this view now?
Watson: I am inclined to think that we should revise the “Company Law” to abolish the independent director system and redesign the institutional structure of corporate governance. After 20 years of testing a system, we can basically draw some conclusions.
It should be said that when my country introduced the independent director system, the understanding and depth of understanding of the securities market were not enough, so the issue of national conditions in the independent director system was ignored.
Independent directors are the “majority” in overseas listed companies and play a leading role in the board of directors. While we are introducing, the independent directors of domestic listed companies, as the “minority” and “outsiders” of the listed company’s board of directors, are difficult to play a role.
News: How to fundamentally reform the independent director system seems to have become an imperative. In your opinion, what are the feasible directions or points worth exploring for the further reform of the independent director system?
Watson:Overall, there are two aspects worthy of attention.
On the one hand, it is necessary to consider whether to abolish the “Company Law” on the establishment of independent directors of listed companies, of course, this must be fully demonstrated. If someone thinks that it should be retained, then it is necessary to demonstrate clearly how the independent director system must be reformed to achieve the expected role they can play. This includes clarifying how the independent director should be produced, what responsibilities should be performed, and the corresponding terms and conditions for the independent director. Here are a series of questions that need to be answered. At the same time, it is also necessary to consider whether the conditions for solving these problems are in line with China’s national conditions and whether it is feasible in all aspects.
On the other hand, it is necessary to study and pay attention to the role of the board of supervisors. People’s expectations of the role of independent directors are actually many overlapping with the duties of the board of supervisors and supervisors stipulated in the “Company Law”. As a permanent institution within the enterprise, the board of supervisors should have played a role of actual supervision, but now it is reduced to a vase. In this discussion of independent directors, the issue of supervisors and the board of supervisors was ignored. It can be said that this should not be an omission. 