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Independent Director Independent Director _Part One_

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Independent Director Independent Director _Part One_ Powered By Docstoc
					Independent Directors Independent directors "independent" research (on)

 Study on the Independence of Independent Director
 Summary: The independence of the independent director system is the heart and soul.
This paper argues that the independence of the independent director system, including
the independent directors of the individual's independence and the independence of
independent directors as a whole. The relative independence of independent directors,
and it is dynamic, and the selection mechanism with independent directors, incentive
and restraint mechanisms, proper incentive and restraint mechanisms to ensure the
independence of independent directors an important factor in moderate and
middle-level incentives constraint is the best "degree." Independent directors in the
board majority of independent directors is the overall status of the basic guarantees of
independence, working conditions, supporting independent directors are independent
directors improve the efficiency (which is "independence" of the ultimate goal) of the
important conditions.
 I. Introduction
 modern joint-stock companies as shareholders, the company distributed and the
ownership and effective control over the separation, shareholders empty shell, from
the highest authority of the company shareholders elected directors of the board,
management and the company control of the heart by all the shareholders of the
company commissioned to exercise management and control, but for various reasons,
should control and lead managers of the Dong Shihui company managers and they
were controlled, leading to the Board of Directors of "death." But managers control
the board, upsetting the normal corporate governance structure, breaking the balance
of corporate power distribution pattern, leading to power over the management of tilt
to the operator, thereby reducing the enterprise value, harm the interests of our
shareholders. Board of reform and revitalization, strengthening the functions of the
board, to "purify" the board, the board increase in independent, a corresponding
reduction in the number of managers or proportion of the board of directors to reduce
their impact on board decision-making, re-straighten the board and management layer
relations and strengthen the management board of the business management and
control, to improve corporate governance has become an important means, naturally
been put forward. Therefore, the independent director system reform and
rehabilitation as an important measure in the board, has been a global scale
governments and relevant organizations to support, but also has achieved some
success and great progress.
 pair of independent director system, its vitality and to maintain effective functioning
of the heart is "independence." Is not excessive to say that the independence of
independent directors and independent directors of the soul of the system. Without
independence, the independent director system is built and there is no longer based on
the independent director system in this "skyscraper" All of a sudden it will completely
collapse. In practice, all countries around the world have been exploring how to
ensure the independence of the independent directors, and explore the various
approaches. The author believes that this independence of the independent director
system includes at least two sides, namely the independence of the independent
directors of their own identity, and second, the independence of independent directors
as a whole. The former, its content both static independence, that is, when the initial
status as an independent director independence, including independence of the
dynamic that the independence of independent director tenure, such as to maintain the
independent status of tenure, incentive and restraint mechanisms, and working
conditions, the impact on independence, and so on; the latter is concerned, mainly
refers to the independent directors on the board in the majority (absolute or relative
majority) status.
  2, the independence of independent directors
  general discussion on the independence of independent directors, there are a lot of
understanding. Combined with relevant parties on the "independence" of the
interpretation and definition, we believe that the real independence of independent
directors, is to require independent directors and company management and can affect
the company's major stakeholders, there is no enough to affect the independence of
director of an independent and objective judgments of other important relationships.
This "significant relationship", which is difficult to list exhaustively enumerated in
law, and only by general law, or general and cited the combination of broad-based
secondary methods listed to illustrate. To ensure this, we believe that: ① the
independence of the content, not only in the form of independent directors required (ie,
nominal) independence, require substantially more independent; ② independent
study, the length of time both from the analysis, but also from the analysis of spatial
dimensions; ③ attention to the independence of the degree of dominance, not only to
pay attention to the reality of the independence of the factors, and pay attention to the
potential impact of the independence of the factors; ④ attention to the relationship
between information disclosure, We should pay attention to the impact of the
independence of the factors explicitly, but also pay attention to the impact of
independence is not explicitly factor; ⑤ independent director "independence" is to
the independence of business interests, and the CPA "independence" required
"detached independence, "different, independent directors have determined not only
to independent enterprises, the enterprises can not be too detached. Specifically:
  (1) affect the independence of independent directors are independent directors to
fulfill the main functions of the corporate directors, corporate management and
business management major stakeholders and so on.
  (2) the location, the independent directors must be in business, business operation
and sufficient to affect the management of the major stakeholders outside influence.
For example, not businesses or employees of the major stakeholders, managers, etc.,
nor is it an important business relationship with some of the major families of
individuals, and so on.
  (3) in time, require not only independent directors present and business, business
operation and sufficient to affect the management of the major stakeholders, not to
make independent and objective judgments which affect any important relationship,
and in the past ( may now be influential on a certain period, such as in the past 3 years
or 5 years) had not had that in the future (right now that may affect a certain period,
such as the next 2 or 3 years) there will not be .
  (4) the degree of dominance, some factors are obvious, some not so obvious, with
special attention to those obvious factor. For example, the blood relationship, the
relationship between capital formation of non-independence is obvious, and therefore
easy to judge, but the interpersonal relationships formed by non-independence are
generally imperceptible.
  (5) in the transparency, some factors have been open, some are not yet public, people
tend to focus has been public information, but will ignore those to be public
information. Dominant factor affecting the independence of the general easy-to-open,
making it easy to attract attention, but are not necessarily hidden factors. Even the
dominant factor, nor will be disclosed in a timely manner.
  (6) the clarity, some non-independence is already clear, but some are yet to clear, but
may indeed not independent. For example, there is clearly marital relationship can not
be considered "independent", but the relationship between male and female friends or
lovers is not easy to say there is no existence of the independence of the relationship
between the latter may be more affected than the former independence.
  (7) so-called "interest", the space of reference should include both economic
interests, but also other non-economic interests, and sometimes non-economic
interests may or major.
  (8) determine whether the independence of affect, sometimes in real terms is more
important than form, but the problem is a matter of form is relatively easy to judge,
and therefore easier to set a uniform standard, not only the essence of the form the
independence of the non-independence is difficult to define a common standard, and
thus difficult to operate.
  (9) the independence of the judge, but also influenced by culture. Different cultural
backgrounds, factors affecting the independence of the different interpretations, and
thus the independence of the judgments will be different. Moreover, the same event in
different cultural contexts are not the same impact, the impact on the independence is
not the same. Culture is affecting the independence of independent directors thereby
affecting the whole system of independent directors and corporate governance are
important factors.
  sum up, we believe that the so-called "independence" is relative. So, say, one person
as a social man, a certain relationship with the surrounding environment, therefore,
not "any relationship" of "independence" does not exist. We speak of "independence"
is based on "does not exist enough to affect the independent directors to make
independent and objective judgments," the "important relationship", but how to define
"enough to impact", how to define "significant relationship", which itself there is a the
problem of subjective judgments. Thus, independence can only be relative, not
absolute independence. Second, independence is a dynamic concept, which needs
associated with the term, due to the existence of independent directors, "assimilation"
and may, therefore, when the beginning of independent directors will be independent
does not mean that has to be independent, corporate governance Cadbury said the
originator of jazz a saying: "I think that, over time, 'outsiders' would unwittingly
become 'insiders"' (HAN Zhi, 2002), clearly explains this issue. Third, we are asking
for independence, is to require independent enterprises, away from the business, but
in reality, we are on the angle and position companies to discuss the "independence" is
to the benefit of business requirements, "independent "can not leave the company.
Therefore, the independent directors of this "independence" and the CPA's
"independence" has a completely different meaning, its purpose is not the same.
Which produces a paradox: the independent director can be independent of business,
can not transcend the enterprise.
, therefore, in our view, the independence of the independent directors, different
countries and regions in this paper different from www.5udoc.com [worry
documentation] to collect and organize, for the original author! Period may have
different regulations and requirements (reflected through the list of law), but by the
real significance of the basic principles and it is constant (reflected by general law).
China Securities Regulatory Commission, "guidance" on the independent director
"independence" is defined by general law and listed on the Combination approach.
According to the previous exposition, the author believes that the "guidance" only to
impede the independence of the subject as "listed company and its main shareholders"
of too little too narrow, and with the "guidance" in the "Independent Directors shall be
Duli perform their duties, free from major shareholders of listed companies, the actual
controller, or other listed companies a stake in the unit or individual "provisions also
differ.
  3, the selection mechanism for independent directors and independent directors of
the independence of the
  independence of independent directors in addition to depending on the
characteristics of its own, but also with their selection mechanism. In theory, in order
to guarantee the independence of independent directors, must have a separate
selection mechanism independent directors. Abroad is usually composed of
independent directors nominated by the Nominations Committee, elected by the
shareholders meeting; currently the company's board of independent directors
nominated by the general, elected by the shareholders, "guidance" provided separately
or in combination holding more than 1% of the shareholders can be nominated to take
care of middle and small shareholders, the election of independent directors can
exercise cumulative voting rights. People often think that the major shareholder or
manager in actual control board situation, this mechanism does not guarantee the
selection of independent directors to be elected with full independence, the
nomination of minority shareholders the right or the exercise of fact do not want high
cost exercise, or because the shares are too small to influence the overall situation.
Therefore, in theory, because the independent directors nominating committee
composed of relatively independent status of the nomination committee formed under
the nomination of independent directors, their independence should be relatively
stronger in the direct nomination by the Board of Directors. However, the
aforementioned independent directors nominated by their relative independence of the
resulting independence of the new independent directors must be relative.
  In fact, the independent directors of the independence of the selection mechanism
depends on the subjective selection process and the extent of non-subjective factors in
the size of the selection by the market than to the selection by certain groups more
independent. It was therefore proposed to set up similar to the "Independent Directors
Association," "Independent Directors Foundation," and other agencies, by the
institutions, to the listed company to appoint independent directors, independent
directors by these institutions to examine and distribute remuneration to independent
directors, to ensure the independence of independent directors. It seemed a good idea,
but I found the first question is, Who the "Independent Directors Association" or the
"Independent Directors Foundation," is responsible? It is generally recommended by
the China Securities Regulatory Commission and other agencies responsible for the
management, which is in fact in the executive-led government allocation of resources
to consider the idea, rather than from the perspective of market allocation of resources
to find solutions to the problem. In addition to more support for doing a "grandma"
can not see any other benefits in addition. Civil liability is still no final commitment.
If you have to consider changing the current independent directors of the selection
system, I think we can consider the listing of each company have to pay a fee, to form
an independent director of the Fund, by the SFC or the Stock Exchange into several
decile, the establishment of several institutions , then the involvement of private
capital from entering, Zucheng Wei "2 He Companies", 由 private capital Fuze
operations of these organizations, and unlimited liability of independent directors
Fund Touru part of the limited liability, without the operation of the participating
agencies, these organizations will have multiple, but independent directors of each
agency in the Fund's investment are equal, the listed companies and other institutions
directly to any of independent directors to hire and pay remuneration, each of these
bodies to establish their own independent directors to their paid personnel, At the
same time improve the civil liability system, listed companies (and management), the
intermediary institutions, the institutions of independent directors, independent
directors with the formation of a "civil liability chain." There is one condition, that is,
company law must allow the existence of the two combined companies.
  matter of fact, from another point of view, solutions to those problems might be,
"Interesting." If there is a good quality team and designate an Independent Director of
the opening of a sound and effective independent director of human resources market,
then the independent directors who will choose what is important? At this time no
matter who is selected, the result will be the same. It also issues for us to consider a
new idea, which is not unduly concerned about the selection of independent directors
who, but fully open to establish a sound and effective independent director of human
resources market. For a fully functioning market mechanism, according to an
independent director of human resources market, the selection mechanism is its
proper meaning. If the selection mechanism is a temporary solution, then the
establishment of an independent director of human resources market is the root of the
problem. But the sound and effective independent director of human resources market
opening does not depend on the way the government can set up an executive order,
but must be perfect from a variety of mechanisms, in particular the incentive and
restraint mechanisms to establish and improve. But should also be noted that the
formation of the independent directors of human resources and market incentive and
restraint mechanisms is not an easy thing to establish, we must take time, and because
of information asymmetry, bounded rationality and incomplete contracts, the role of
the market will be subject to certain limitations, therefore, can not ignore the selection
mechanism for the independent directors. Proper way to solve this problem should be
treating the symptoms to treating the symptoms as a means to achieve the
fundamental objective.
  4, the independence of independent directors as a whole - the majority of
independent directors in the board position
  if that is the independence of the independent directors of the individual independent
directors to ensure that every director of the independent exercise of the power of the
foundations, then the independence of independent directors as a whole is an
independent director on the board to ensure decision-making process make a real
premise. Obviously, if the independent directors of the company's board of directors
as a whole, not independence, but attached to executive director, then, even if all the
independent directors have a strong independent individuals, their voices will be the
implementation of the board directors the voice of annihilation, they board the role of
decision-making process also can be at best staff, consultation and impact, but any
real role in decision-making. Then the real work of the board of directors or the
executive director of group.
  how to ensure the independence of independent directors as a whole do? The easiest
way is to let an independent board of directors has a majority position. Independent
directors in the board of directors a majority position, they are as a whole, the entire
board of directors on the conditional-led decision-making process. Together with
other conditions, and business management and key stakeholders does not matter, can
help to make more objective and fair business development, and improving the value
judgments of independent directors, will be able to make correct decisions in the
boardroom . Therefore, the independent directors in the board majority of independent
directors to play a decision-making is an important prerequisite for the role.
  perhaps precisely for this reason, some countries and regions require that the board
majority of independent directors in the position (hole Cheung, 2001), Britain and
other powers board of independent directors of listed companies are usually more than
half of the seats occupied . GM's board of directors, CE0 is the only inside directors,
all other members are independent directors, not employees of General Motors this
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