China Fines Independent Board Director

Home>>Business

Last updated at: (Beijing Time) Friday, August 16, 2002

China Fines Independent Board Director

The Beijing No.1 Intermediate People's Court after the first trial rejected the suit of Lu Jiahao, who appealed against the punishment given him by the China Securities Regulatory Commission (CSRC).

DISCUSSION

CHINESE

SEND TO FRIEND

The Beijing No.1 Intermediate People's Court after the first trial rejected the suit of Lu Jiahao, who appealed against the punishment given him by the China Securities Regulatory Commission (CSRC).

It is the first trial in China involving an independent board director's responsibility in a corporation's illegal operation.

On Sept. 27, 2001, Lu Jiahao, former independent board director of the Zhengzhou Baiwen Corporation Limited, which was notorious for its fraudulent financial practices, was found guilty of malpractice and fined 100,000 yuan by the CSRC.

To improve the corporate governance in listed companies, CSRC issued a circular on Aug. 16, 2001, which stipulated an independent directors' system should be established.

According to the circular, independent directors should be honest, given they "take no position other than as a board director and have no relationship with the company or its major shareholders that may affect independent and objective decision-making."

Independent directors, who are selected by board, are required to safeguard the overall interests of a company, and to pay particular attention to protecting the interests of small and medium-sized investors.

Lu said he didn't take part in compiling false account and did not ever receive a formal letter of appointment. "I always regard the independent director as a honorary title," Lu told the court.

His case was rejected simply because it had exceeded the legal time limit, and the court did not make any ruling on the punishment itself.

This trial has aroused heated discussion among economists and social researchers on the rights and duties of independent directors, and will have an important effect on China's independent director system.

Questions?Comments? Click here

Regulator Solicits Advice for Requiring Independent Board Directors

China to Require Independent Board Directors for Listed Firms

China's High-tech Development Geared to Marketable Industries ( 46 Messages)

Chinese GRE Test Takers Shocked by US ETS Decision ( 24 Messages)

Bush Looks Forward to Chinese President Jiang's Visit: Spokesman ( 22 Messages)

US Should Change Two-sided Policy: Opinion ( 27 Messages)

Shanghai Financial Center Aiming High ( 10 Messages)