Opinion: Time to Overhaul the Independent Director System
The legal accountability sought by a Guangzhou court for outside board members in the Kangmei Pharmaceutical Co. fraud shows that China needs to rethink the responsibilities of independent directors and their liability for wrongdoing.
Kangmei’s five independent directors each faces more than 100 million yuan ($15.7 million) of fines for their role in signing off on fraudulent financial reports under a ruling by the Guangzhou Intermediate People’s Court. The case caused 2.46 billion yuan ($385 million) of losses to 52,037 investors, and the outside board members are partially liable, the court found.
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