In concept, a company’s independent directors serve to check abuse of power and protect shareholders. In practice here in China, they’re often seen as a vehicle for corruption, as companies stack their boards with government officials who accept handsome compensation for the post and do an indifferent job.
China’s central authorities have been cracking down on the phenomenon, with the Communist Party issuing a circular last October banning officials and college professors from holding second jobs. According to the state-run Xinhua news agency, as of this week, more than 200 listed companies have reported independent director resignations.
October’s directive—which also said officials could only take on such posts following a three-year cooling-off period once they leave office—isn’t the first time that the party had cracked down on such activities: In 2009 and 2011, the country’s education and finance departments also banned cadres from taking outside jobs or holding independent director posts.
Still, according to statistics from the party-controlled China Youth Daily, in a survey of 5,760 independent directors at Shenzhen and Shanghai-listed companies conducted last year, fully 45% had government backgrounds.
A Monday editorial in party mouthpiece the People’s Daily said it was important for cadres “not to mistakenly convert their public power into private power, or to mistakenly think they have captivating backgrounds, when in fact all people are seeing is their backgrounds.” Official resignations from company boards, the paper said, would be a way to “purify” the party.
The move to purge company boards of officials comes as President Xi Jinping has pushed a broader anti-corruption drive that has encompassed a crackdown on everything from lavish weddings and funerals to red carpets and even luxury mooncakes. After decades of breakneck economic growth that has disproportionately benefited companies and individuals with political connections, the party is eager to erase the notion that the country’s economic system is rigged, particularly as growth has begun to slow, political analysts say.
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