Officials quit corporate boards

Around 40,700 vacancies since last year's ban

Some 40,700 independent director positions for listed companies are or have already been vacated following last year's issuance of a ban on officials working at companies, the Xinhua News Agency quoted the Organization Department of the Communist Party of China (CPC) Central Committee as saying on Wednesday.

Among the positions, 229 were held by officials at the provincial or ministerial level. Resignations have been completed in 173 cases, while the officials involved in the 56 other cases are undergoing the resignation process, according to statistics released by the Organization Department.

The department also pledged to continue pressing the officials to resign and closely monitor their resignation procedures with another upcoming detailed directive. It welcomes public feedback on any ongoing violations.

The ban on leading government and Party officials working at companies was introduced in October in a move to guarantee a sound, orderly market economy. While retired officials are not entirely ruled out from working for companies, they must work in fields unrelated to their former positions or wait three years before taking a job in a related industry.

Meanwhile, Ba Shusong, a senior economist at the State Council Development Research Center (SCDRC), offered to resign from his post as an independent director at China Minsheng Bank on Tuesday.

"SCDRC asked all its research fellows to quit working as independent directors at listed companies. Ba will remain in his posts before another director fills in," read a notice issued by Minsheng Bank.

The China Securities Regulatory Commission (CSRC) introduced the independent director system in 2001. Currently, many independent directors have experience working inside government bodies or government-funded institutions.

"Companies choose those directors for their social resources and background, which may provide the company with more loan opportunities and personal connections. But few actually know their companies well enough to help them make better decisions," Yin Zhichao, a professor with the School of Finance at the Southwestern University of Finance and Economics in Chengdu, told the Global Times.

Total payment to independent directors employed at companies listed on China's A-share market was 423 million yuan ($67.7 million) in 2013, while Ba's compensation topped 1 million yuan, according to Wind Info, a Shanghai-based financial data service provider.

"It is required that at least one-third of the board of a listed company be independent directors. Many small- and medium-sized companies have to follow the rules while working to become a listed one. The rising demand for independent directors, who are expected to be former officials or renowned scholars, has led to the high salaries," Yin explained.

China's regulations stipulate that independent directors can work at a maximum of five listed companies.

While the system was designed to introduce an independent power to balance major shareholders, Yin pointed out that many independent directors are often indifferent at board meetings.

"The system needs to be revamped to guarantee independent and professional opinions are heard and can make a difference," Yin said.