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The governance of listed companies is re-spotlighted for the recent cases about the dominance of public funds and minority shareholders in corporate governance. With the gradual development of the capital market and the establishment of fundamental systems for the corporate governance structure in recent years, the governance and the transparency of listed companies have been greatly improved. Meanwhile, the development of the capital market endows corporate governance with new connotation and also poses new requirements for the regulation on corporate governance. It can be seen from the annual reports of SSE-listed companies in 2011 that positive changes have taken place in listed companies in terms of the compilation and release of social responsibility reports, the duty-performing of directors, supervisors and senior management members, the establishment of internal control systems, the disclosure of audit reports on internal control, etc. Besides, the Shanghai Stock Exchange (SSE), taking corporate governance as the basis for the construction of the blue chip market all the time, has recently published the notice related to listed companies' focus on the investor relation management and plans to issue measures for toughening regulation on information disclosure of cash dividend distribution in a bid to improve the governance and the transparency of listed companies, facilitate their standard operation and strengthen the protection of legal rights and interests of investors.
Fundamental systems for the governance of SSE-listed companies have gradually taken shape.
As repeatedly stated by Chairman Guo Shuqing of the China Securities Regulatory Commission (CSRC) in public, companies' quality is decisive to the future of Chinese economy so multiple measures should be taken to ceaselessly rationalize the corporate governance structure of listed companies. Listed companies are the basis of the SSE's blue chip market and companies' quality is the cornerstone of the capital market, so the SSE has always regarded the rationalization of corporate governance as a major way to improve the quality of listed companies.
According to resources, since the promulgation and implementation of the "Rules for Governance of Listed Companies" by the CSRC as early as in 2002 till the 10th forum on corporate governance last year, the SSE had tried every means to improve the governance structure of listed companies. For example, the SSE successively formulated relevant provisions and guidelines for the governance structure, the construction of the board of directors, the information disclosure, the connected transactions and the behaviors of controlling shareholders for listed companies, held influential forums on corporate governance, conducted exchanges on corporate governance and established the governance board for rationalizing the governance structure of the capital market and improving the quality of listed companies.
Through years' efforts, the SSE has established basic frameworks and principles for the governance structure of listed companies. For instance, the SSE ushered in the system of independent directors for protecting rights and interests of minority shareholders, set up the board of supervisors for strengthening internal supervision of listed companies, rationalized the system of information disclosure, toughened the regulation on the usage of funds raised by listed companies, established the registration system for insiders of inside information and perfected the comprehensive prevention and control system for insider trading. After years' development, the governance of listed companies has embarked on the road of standardization and made historic achievements. Meanwhile, the governance and the transparency of listed companies on the A-stock market have been greatly improved.
Internal control reports and social responsibility reports receive increasing attention.
In recent years, with the more strict requirements for the quality of listed companies, the SSE has released some more policies on the establishment of internal control systems and the disclosure of social responsibility reports for listed companies to elevate their governance. The latest data show that by 2011, listed companies had made remarkable progress in the above-mentioned aspects, including the increase in the proportion of listed companies disclosing internal control reports, the increase in the number of disclosed social responsibility reports as well as good performances of independent directors in duties.
On one hand, more listed companies have established the internal control system and disclosed internal control reports. The "SSE Guidelines for Internal Control of Listed Companies", issued by the SSE in June 2006, is the first document in China for guiding listed companies for the establishment and improvement of internal control systems, aiming to improve the quality of listed companies' internal control, strengthen their corporate governance, facilitate their establishment of effective and transparent supervision systems, reflect and elevate their corporate value and enhance their competitiveness.
According to statistics, since the promulgation of the "Guidelines for Internal Control of Listed Companies" by the SSE in 2006 till the implementation of the basic standard for internal control in 2011, the number of listed companies disclosing internal control reports in annual reports increased from 34 in 2006 to 427 in 2011 with year-on-year increases witnessed. Moreover, a total of 258 SSE-listed companies employed an auditor to give verification and evaluation opinions on their internal reports in 2011. In addition, 933 companies filled in the basic information about the construction of internal control in the chapter of Corporate Governance Structure in their annual reports, 70.3% of which stated their established departments for the construction of internal control systems, up by nearly 20 percentage points compared with that in 2010. Thus, SSE-listed companies have made great strides in the disclosure of internal control reports.
On the other hand, more listed companies have disclosed their social responsibility reports. The SSE has always pushed forward the compilation and release of social responsibility reports, and advocated the companies to perform their social responsibilities and apply the concept of social responsibility to production and operation. From 2008, the SSE has required three kinds of listed companies to be obliged to disclose social responsibility reports, namely, constituent companies in the SSE Corporate Governance Sector, companies issuing overseas listed foreign-funded shares and financial companies, should disclose how they perform social responsibilities. Besides, the SSE has encouraged eligible companies to disclose social responsibility reports. Statistics shows that since the issuance of the above-mentioned requirements till now, year-on-year increases can be seen in the number of listed companies for the disclosure of social responsibility reports. In 2011, a total of 351 SSE-listed companies disclosed social responsibility reports, up by 7% and 21% compared with that in 2010 and 290 in 2008 respectively. Among them, 296 companies were obliged to disclose social responsibility reports while 55 companies were voluntary to do that, a slight increase from 52 companies in 2010.
Furthermore, blue-chip companies at various tiers demonstrate different characteristics in the disclosure of social responsibility reports. In particular, a large proportion of constituent companies in the SSE 180 Index disclosed their social responsibility reports with high quality, employed examination institutions and gradually integrated social responsibility in their daily operation, strategic decisions and core value concepts. The constituent companies in the SSE 380 Index got more involved in the voluntary disclosure of social responsibility reports, and became more active to disclose non-financial information and perform social responsibilities. What's more, independent directors of SSE-listed companies were well-performed in their duties. Statistics shows that by the end of 2011, a total of 2,908 independent directors had been in office in SSE-listed companies, who were supposed to attend 29,581 person-time directorate meetings during the reporting period of all independent directors. Actually, independent directors themselves attended 28,460 person-time meetings, authorized others to attend 977 person-time meetings and were absent from 73 person-time meetings, accounting for 96.21%, 3.30% and 0.24% of the total meetings, respectively. It can be seen that independent directors are satisfactory in the attendance of directorate meetings with a high rate of attendance in person. In terms of the distribution, among 2,908 sitting independent directors, 330 simultaneously take the position of Independent Director in two listed companies, accounting for 11.35% of the total independent directors while those simultaneously taking the position of Independent Director in three or more listed companies account for 4.44% of the total. Most independent directors hold a position in one or two listed companies, which guarantees enough time and energy for their duty-performing.
The dividend distribution and investor relation management will be improved.
Despite the achievements having been made, it is still no easy task to improve the governance of listed companies. Chairman Guo Shuqing pointed out at the 10th forum on corporate governance China held by the SSE last year that measures would be taken to improve the corporate governance in six aspects, including further strengthening the protection of legal rights and interests of investors and improving the transparency of listed companies. Thus, new requirements are put forward for the corporate governance at the current stage. The SSE is preparing for the issuance of new measures, including toughening the regulation on information disclosure for cash dividend distribution and the latest "Notice of Strengthening Investor Relation Management of Listed Companies".
The protection of legal rights and interests of investors, as the principal function of corporate governance, has been highlighted by the regulatory authorities. Actually in recent years, the CSRC has made great efforts on protecting legal rights and interests of investors and timely punished various rule-breaking behaviors, including insider trading cases involving Huang Guangyu and Dong Zhengqing, market manipulation cases involving Wang Jianzhong and other major cases.
To increase the return for investors, the CSRC released a series of policies for strengthening dividend distribution of listed companies, which has effectively protected legal rights and interests of investors. Although in recent years the market has been getting mature where listed companies have been making progress in the dividend distribution, especially in the stability of dividend distribution and the rate of return, it has a long way to go to become a real mature market as many listed companies are still too mean about dividend distribution. Therefore, the CSRC has worked out various rules and regulations for urging listed companies to specify the policies on dividend distribution, to raise the rate of return to investors' investments and to protect the rights and interests of investors.
As the indication of improving the quality of the blue chip market, the SSE always attaches more importance to protecting the rights and interests of investors. For example, since this year, the SSE has enhanced investors' abilities of rational participation by launching special publicity activities and protected the rights and interests of investors through multi-channels such as cementing the supervision on the trading at the preliminary stage of new shares listing and taking risk-proof measures on the new shares speculation.
In a bid to strengthen the protection to the rights and interests of investors, it is a must to further cement investors' subject positions to their rights and create conditions for ensuring investors' effective exercise of rights including those to know, vote, claim and appeal, in addition to toughening regulatory enforcement and resolutely cracking down on and punishing rule-breaking and faith-breaking activities that disorder the market and harm investors' legal rights and interests. Therefore, it is the key to intensify the supervision on the disclosure of the management of raised funds, dividend distribution and investor relations of listed companies and other aspects closely related to investors' all interests, for the purpose of protecting the interests of investors.
According to sources, the SSE has recently released or plans to issue relevant policies in the near future, including those on strengthening the supervision on the disclosure of the cash dividend information and urging listed companies to focus on the investor relation management. Especially, the investor relation management has much room for improvement. As there always exists much room for improving the investor relation management of listed companies, the SSE, by taking a lot of new measures, will urge them to do a good job in this aspect, said an SSE official.
