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On April 14, 2023, the General Office of the State Council issued the Opinions on Reform of the Independent Director System of Listed Companies (hereinafter referred to as the Opinions). The Opinions sets forth systematic reform tasks from eight aspects, including clarifying the responsibilities of independent directors, optimizing the modes of their performance of duty, strengthening the management of their qualifications, improving the system for their selection and appointment, strengthening the guarantee for their performance of duty, tightening supervision and management for their performance of duty, improving the restraint mechanism for their responsibilities, and optimizing the collaborative and efficient internal and external supervision system. It provides important guidelines for promoting the formation of a more scientific and reasonable independent director system.
Independent directors are a crucial part of the governance structure of listed companies in China. Therefore, promoting an improved independent director system is an important guarantee for enhancing the governance capability of listed companies and building a modern enterprise system with Chinese characteristics. With the comprehensive deepening of the capital market reform, the current independent director system can no longer meet the inherent requirements for high-quality development of the capital market. The Shanghai Stock Exchange (SSE) has attached great importance to this and made the independent director system reform a priority of continuously deepening the inspection and rectification and implementing the China Securities Regulatory Commission (CSRC)'s new round of three-year action plan to improve the quality of listed companies. On the occasion of the release of the Opinions, the SSE will thoroughly implement the reform requirements from three aspects as follows.
First, promoting the implementation and transition of system reform. According to the major adjustments and arrangements of the independent director system reform, the SSE will comprehensively revise the Rules for Stock Listing and systematically improve the guidelines for standardized operations. Guidelines for announcement format, business handling, and other business will also be adjusted in time to ensure the simplicity, clarity, and feasibility of rules for independent directors.
Second, strengthening the appointment management and performance supervision of independent directors. The SSE will guide listed companies and related parties to prudently nominate and appoint independent directors and clarify the primary responsibilities of candidates and nominators so as to determine the qualifications of independent directors in a standardized and transparent manner. In its routine supervision, the SSE will pay close attention to the performance of independent directors and urge them to comply with performance requirements such as independence. It will build a sound, scientific, and rigorous accountability system for independent directors, reasonably distinguish responsibilities based on their performance, and strengthen collaboration with the CSRC's regional offices to ensure the independent directors' performance of duty.
Third, constantly providing proper services. Since 2001, the SSE has offered 125 training sessions for independent directors, attended by nearly 40,000 people. In accordance with the requirements of supervision transformation, the SSE will further promote the "three open-door" policy, keep carrying forward the spirit of "shopkeeper", and dynamically adjust and optimize the training courses to help independent directors quickly adapt to the changes brought by the reform. It will further improve the communication mechanism between independent directors and the SSE and effectively use the feedback channels such as the independent director consulting hotline, thus guaranteeing independent directors' active performance of duty. It will conduct extensive seminars and research to hear questions and suggestions from independent directors and continue to push for a retrospective review of the system.
Going forward, the SSE will resolutely implement the decisions and arrangements of the CPC Central Committee and the State Council, and further strengthen its sense of proactive service. Through a multi-pronged approach and consensus building, it will make every effort to ensure the smooth implementation of the independent director system, promote independent directors to fully perform their roles, and create a favorable atmosphere for proper corporate governance and a market environment that honors law and integrity.
