Enforcement
A key question that is often not clearly answered in the various standards for corporate governance is how, if at all, they shall be enforced. The Independent Director Opinion, by its very name—a "guidance opinion"—suggests that it is not strictly mandatory, even though listed companies are invited to implement it. There is nothing in the Opinion to suggest what kind of sanctions might follow upon a company's failing to implement its provisions. The Draft Independent Director Opinion provided that if a company failed to implement the provisions "without a proper reason," it would be publicly criticized by the CSRC and ordered to implement the provisions within a specified time, and would be required to note the circumstances in its public disclosures. Even this rule did not specify exactly how the CSRC would back up its order if it were disobeyed, and in any case the rule disappeared from the final version. The only place where disclosure appears to be used as an enforcement mechanism is in Section 5, where a company is required to disclose any failure to grant independent directors the powers listed in that section. It could be that the CSRC intends to use its powers over listed company filings to enforce the Opinion: in other words, it would reject filings from companies that did not implement the provisions of the Opinion. This is precisely the threat it made in the 1997 Guidelines. Yet, given that the CSRC apparently knows of this enforcement mechanism and is capable of explicitly invoking it, it is curious, and possibly significant, that it did not do so in the Opinion. According to one CSRC official with whom I spoke, the sanction of an official reprimand from the CSRC—a possible alternative to the sanction of rejecting a filing—remains powerful, because most company officers are still in effect civil service bureaucrats working in state enterprises, and are therefore sensitive to anything that might blot their record and affect their chances for promotion. Ultimately, however, management that chooses not to install independent directors may do so with impunity. As noted below, four companies had still not installed independent directors as of the end of July 2004, with no apparent official consequences.
บังคับใช้A key question that is often not clearly answered in the various standards for corporate governance is how, if at all, they shall be enforced. The Independent Director Opinion, by its very name—a "guidance opinion"—suggests that it is not strictly mandatory, even though listed companies are invited to implement it. There is nothing in the Opinion to suggest what kind of sanctions might follow upon a company's failing to implement its provisions. The Draft Independent Director Opinion provided that if a company failed to implement the provisions "without a proper reason," it would be publicly criticized by the CSRC and ordered to implement the provisions within a specified time, and would be required to note the circumstances in its public disclosures. Even this rule did not specify exactly how the CSRC would back up its order if it were disobeyed, and in any case the rule disappeared from the final version. The only place where disclosure appears to be used as an enforcement mechanism is in Section 5, where a company is required to disclose any failure to grant independent directors the powers listed in that section. It could be that the CSRC intends to use its powers over listed company filings to enforce the Opinion: in other words, it would reject filings from companies that did not implement the provisions of the Opinion. This is precisely the threat it made in the 1997 Guidelines. Yet, given that the CSRC apparently knows of this enforcement mechanism and is capable of explicitly invoking it, it is curious, and possibly significant, that it did not do so in the Opinion. According to one CSRC official with whom I spoke, the sanction of an official reprimand from the CSRC—a possible alternative to the sanction of rejecting a filing—remains powerful, because most company officers are still in effect civil service bureaucrats working in state enterprises, and are therefore sensitive to anything that might blot their record and affect their chances for promotion. Ultimately, however, management that chooses not to install independent directors may do so with impunity. As noted below, four companies had still not installed independent directors as of the end of July 2004, with no apparent official consequences.
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