Editorial: Reasons to Be Wary of Calls for Abolishing China's Independent Director System

Recently, a Chinese court made a first instance judgment on the Kangmei Pharmaceutical Co. Ltd. case, China’s first class-action lawsuit, ordering the company to compensate its investors a total of 2.459 billion yuan ($390 million) for infringements due to false statements. It ruled that five independent directors (former and current) were liable for Kangmei’s fraud, fining them hundreds of millions of yuan. This verdict sparked heated debate, and gives us cause for reflection: How should we treat the independent director system? How can Chinese companies improve corporate governance?