On March 29, the Shanghai Stock Exchange (SSE) and the Organization for Economic Co-operation and Development (OECD) co-sponsored the "Symposium on China's Corporate Governance Policies" in Shanghai. Attending the symposium were nearly 100 experts and scholars from OECD, the China Securities Regulatory Commission (CSRC), the State-owned Assets Supervision and Administration Commission, the Development Research Center of the State Council, listed companies and research institutions at home and abroad.
CSRC Vice Chairman Gui Minjie pointed out at the meeting that listed companies are the footstone of a securities market while effective governance mechanism guarantees the sustained and healthy development of listed companies. With the rapid development of the capital market, many investors, especially institutional investors, pay more and more attention to corporate governance analysis when they appraise the investment value of a company, which is a very positive change. Gui pointed out that in recent years, the CSRC has done a lot of work to upgrade the governance level of listed companies in the following four aspects. Firstly, to provide legal guarantee for the improvement of corporate governance mechanism, it has boosted the system construction of laws and regulations for company supervision. Secondly, it has propelled the equity division reform, thus eliminating the institutional obstacles to the effective functioning of the governance mechanism of listed companies. Thirdly, it has implemented strict supervision and accountability systems for major shareholders and actual controllers. Fourthly, it has improved information disclosure system and enhanced transparency in corporate governance. Upon these years' efforts, China's capital market has initially established a corporate governance framework in line with its current development level. The practice of listed companies for improvement of cooperate governance has also set a positive example for reform of China's state-owned enterprises.
He said that in light of the actual situation of China's securities market, the CSRC's next step is to take active measures in the following areas:
Firstly, it will continue to strengthen fundamental system construction of corporate governance. On the one hand, to form an internal driving force mechanism for the promotion of listed companies' senior management's services for all shareholders, it will gradually push forward equity incentive of listed companies. Meanwhile, to reinforce external regulatory mechanism for corporate governance, it will urge legislatives to raise some effective supervision experience of corporate governance to law level. For example, the active promotion of compilation of the "Management Rules on Listed Companies' Supervision" and the "Management Rules on Listed Companies' Independent Directors" aims to raise some guidance opinions of supervision departments for information disclosure and independent directors to legal requirements with more compelling power.
Secondly, it will improve judicial remedy and law enforcement mechanisms to strengthen legal responsibilities of directors, managers and controlling shareholders. Based on the civil action of false statements on securities market, the CSRC will, referring to international experience, work to improve shareholder derivative suit and other judicial remedy measures as well as perfect the securities civil compensation mechanism for effective protection of the legal rights and interests of investors.
Thirdly, it will go all out to develop market for corporate control for a market-oriented regulatory mechanism for corporate governance. The CSRC will study and work out a financial consultant system for merger, acquisition and reorganization of listed companies and a management system for merger of listed companies. Meanwhile, to adapt to the market environment of all-floating of listed companies' shares after equity division reform, it will improve the management system of significant reorganization of listed companies.
Fourthly, to let institutional investors play a full and active role in corporate governance, it will continue to expand the size of institutional investors, especially pension funds, insurance companies and qualified foreign institutional investors. Moreover, it will further improve the structure of institutional investors to make them pay more attention to "voting by hand" instead of "voting by foot", thus giving full play to institutional investors in checks and balances of corporate governance.
Fifthly, it will promote the culture of corporate governance to form and deepen the shareholder culture and credit culture on China's capital market.
SSE President Zhu Congjiu said that the SSE, with nearly RMB10 trillion stock market capitalization, is becoming a major global capital market. China's capital market is undergoing profound changes. On the one hand, this has secured the footing of China's market among the global markets. On the other hand, it makes higher demand for governance of listed companies. All these changes are in five aspects. Firstly, a large number of backbone enterprises of national economy have been listed on the SSE, which restructures China's economy and create a new situation with diversified main participants who objectively request listed companies to further improve the governance structure. Secondly, more and more international investors have participated in China's capital market. A large number of foreign investors have increasingly invested in Chinese enterprises through QFII. All this requires the domestic capital market to keep up with the international capital market, including a more comprehensively international cooperate governance. Thirdly, the development of institutional investors has made their position on the China's capital market even more important. On the one hand, they have promoted the rapid development of the capital market. On the other hand, pension, social security and insurance institutional investors' profit made through the capital market will be the basis for the long-term development of China's social security system, thus making the development of the capital market a major driving force behind the development of a harmonious society in China. This means that corporate governance has become an important issue on the building of a harmonious society. The fourth change is the upcoming development of domestic debenture market, which will effectively boost the importance of creditors in corporate governance. Nevertheless, it also requires China's corporate governance to rise to a new level. Fifthly, as market reorganization is more active after all-floating, the protection of the rights and interests of small and medium shareholders in the reorganization process will face a very different market environment compared with the original reorganization, merger and acquisition by administrative transfer. Therefore, it should deal with the new challenges in corporate governance in its system and implementation.
Zhu said that as the organizer of the Shanghai securities market, the SSE has been paying attention to tracing and studying the international trend and practice of corporate governance. Meanwhile, it has made long-term and sustained investigation on the governance of domestic listed companies and solved problems in its practice. Facing the new challenges, the SSE will focus its work on the following two aspects. One is to continue to raise the level of China's corporate governance and enhance the market awareness of corporate governance. Particularly, to make market participants understand their own role to play in corporate governance mechanism, the SSE will take the initiatives to orient all investors including individual investors to pay more attention to the governance structure of listed companies. The other is to earnestly perform its duties as a front line regulator of the capital market to raise the level of corporate governance, including strengthening listed companies' information disclosure, introducing good modes of corporate governance for listed companies and reinforcing supervision and punishment for misconduct.
Zhu concluded that corporate governance reform, a long process, needs the culture, the system and the supervision to deliver promotion. He said that through the joint efforts of all members of the capital market, China's corporate governance level would be further improved for a better development of China's capital market and the SSE.
During the one-and-a-half day heated discussion, both domestic and overseas delegates compared notes on five topics, including OECD's guidelines on corporate governance and directory of the directorate, specific challenges for the directorate of state-owned enterprises, establishment of good operational procedures for the directorate in China, the latest academic research achievements, the latest progress of OECD and China in corporate governance policies and practice.
