Varieties of independent directors in Asia: A taxonomy

• Main Authors: PUCHNIAK, Dan W., KIM, Kon Sik
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2017
• Subjects: Asian Studies; Business Organizations Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/3943; https://search.library.smu.edu.sg/discovery/fulldisplay?docid=alma99577088602601&context=L&vid=65SMU_INST:SMU_NUI&lang=en&search_scope=Everything&adaptor=Local%20Search%20Engine&tab=Everything&query=any,contains,Independent%20Directors%20in%20Asia:%20A%20Historical,%20Contextual%20and%20Comparative%20Approach&offset=0
• Institution: Singapore Management University

Introduction At first blush, the rise of the independent director in Asia appears to be a straightforward example of a significant legal transplant from the United States (US) to Asia. A few decades ago, independent directors, which are an American legal invention, were virtually non-existent in Asia. Today, as this book reveals, they are ubiquitous throughout Asia. Even for those familiar with corporate governance in Asia, the evidence in this book demonstrating the extent to which Asian jurisdictions have promoted and adopted ‘independent directors’ will likely surprise. A recent report from the leading American proxy advisory firm Institutional Shareholder Services (ISS) claims that over 70 per cent of listed companies in China now have a board comprising a majority of ‘independent directors’ - ranking China far ahead of Australia and the United Kingdom (UK) in terms of its percentage of boards with a majority of ‘independent directors’. For over a decade, Singapore has reported that a majority of all of the directors in its listed companies are ‘independent’, and that 98 per cent of its listed companies comply with the ‘independent director’ provisions in its ‘comply or explain’ Code of Corporate Governance - a higher compliance rate than in the UK, where the ‘comply or explain’ model was invented. In 2000, South Korea made it mandatory for all large listed companies to have a board composed of at least half ‘independent directors’. Additionally, since 2004, such boards have been required to have a majority of ‘independent directors’ - which on its face is a stricter requirement than in any major jurisdiction in the European Union, where the regulation of ‘independent directors’ generally takes the form of non-mandatory recommendations. In 2000, India made it mandatory for publicly listed companies to have a board with at least one-third ‘independent directors’, and if the board chair is also an executive of the company then the board must be at least half ‘independent directors’ - which again appears to be a stricter requirement than in most leading Western countries. In as early as 1993, Hong Kong made it mandatory for all listed companies to have a board with at least two ‘independent directors’, and more recently made it mandatory for at least one-third of such boards to be composed of ‘independent directors’.