Law Enforcement on the Role of Independent Directors in the US: An Implication to China

This article investigates the enforcement of law on the role of independent directors in the US. The purpose is to find suggestions for Chinese policy makers to improve its system of law enforcement on the role of independent directors as effective monitors. In the US, there is a working system of law enforcement in place by way of charter provision, business judgment rule, shareholder litigation and SEC enforcement action. In China, similar elements of law enforcement are missing. Thus, a working system of law enforcement on the role of independent directors is not in place. Unless Chinese legal system can develop a working system of law enforcement on the role of independent directors, there is still a gap between the law on the books and the law in action regarding the role of independent directors, which makes independent directors failed to work as expected in China.