Experts welcome guideline to improve corporate governance

Experts believe that a notice outlining policies related to corporate law and governance should improve the level of governance in China, as reform has come a long way, and its impact should be significant.

Tian Lihui, a chair professor of finance at Nankai University in Tianjin, said that the key to capital market growth lies not only in the company's initial public offering in a market-oriented manner but, more importantly, in the proper development of listed companies.

"Sound corporate governance is the foundation of a company's growth, and independent company board directors are key to ensuring its proper governance," Tian said. "Only when listed companies are able to grow healthily and the rights and interests of minority shareholders are protected can the capital market in China realize steady, long-term growth."

Tian said that compared to previous efforts to introduce and improve the independent director system, the new guideline covers several important areas.

"The selection process for independent directors has been improved, and the process in which they are chosen has been clarified," he said.

"Regarding the way independent directors play their role, the new notice also stressed that listed companies are obliged to support independent directors and underscored their right to know about company affairs," Tian continued.

Zhu Chuanlu, a partner at the Beijing Zhonglun W&D Law Firm, which specializes in taxation law and corporate governance, said that the new guideline is an essential step toward protecting the rights and interests of investors, as it calls for improving the responsibilities of independent directors, enhancing their independence and objectivity, and strengthening the accountability mechanism.

"Independent directors play a crucial role in monitoring and protecting the interests of minority shareholders in listed companies," he said. "A well-functioning independent director system can help prevent corporate malfeasance, improve corporate transparency and enhance investor confidence in the market."

Zhu said he hopes the reform will be successful.

"This will largely hinge on how well the guidelines are implemented and enforced. For example, sufficient training and resources need to be provided to independent directors. A robust system is also needed to evaluate their performance and hold them accountable," he said, adding that the diligence of all stakeholders, including regulators, listed companies and independent directors, is indispensable.