In line with the new Securities Law and Company Law, the
China Securities Regulatory Commission (CSRC)
yesterday issued on its website the amended guidelines for the
constitutions of listed companies which were first published in
1997.
The new guidelines seek to improve corporate governance by
limiting the power of executives to prevent abuse of authority and
fraudulent transactions which have been prevalent in some listed
companies.
It states that the highest authority in a listed company is the
conference of shareholders, not the board chairman and that any
major decisions must be approved by the conference.
To prevent the control of companies by 'insiders' senior
managers and employees' representatives must not account for more
than half of those sitting on the board.
Shareholders can not vote on transactions in which they are
involved and only the conference of shareholders can appoint
accounting firms. This is to prevent accounting frauds.
Board members, supervisors and senior executives were formerly
banned from selling their shares during their tenure. Now they are
allowed to sell them one year after the stocks are listed or six
months after termination of service. In any given year they can not
sell more than 25 percent of the shares they have in the
company.
China currently has around 1,300 listed companies. The poor
performance and bad management of some firms is often blamed for
the disappointing performance of the stock market despite the
dynamic national economy.
(Xinhua News Agency March 22, 2006)