Prof. Junhai Liu

The Theory and Practice of the Boards of Directors in China

Inclusive composition and meaningful process of the board of directors reflects the performance of the corporate governance in China. However, detailed rules on the composition and process of the board depend on the specific category of   individual firms, including one-man corporations, limited liability corporations, joint stock corporations and listed corporations. There are also special institutional arrangements on the foreign invested corporations in China. For the listed corporations, the mandatory requirements of independence of independent directors and the minimum requirements on the diversity of board members are generally detailed in CSRC regulations. However, the pros and cons of board member acting both Chairman and CEO need further examination, and the implication of diversity of board members remain to be expanded from the dimension of expertise to gender and memberships of different communities. For the limited liability corporations, the shareholders enjoy great autonomy in setting the composition and process of the board in the articles of incorporation. As far as the process of the board of directors is concerned, more and more litigations have been centered around the both the substantial and procedural defects of the resolutions of the board in both privately held corporations and publicly held corporations. Last but not the least, the failures or deadlocks of the  board of directors need to be addressed where the meetings of the board are unable to conduct or the voting on the resolutions of the board produce an unbreakable tie.