Original title: Independent Dong retreat!23 A-share independent directors resigned a week after the Kangmei case. What are they afraid of?
After the first trial of the Kangmei case that shocked the market fell, there was a wave of “resignations” for independent directors of A-share listed companies (hereinafter referred to as “independent directors”).
According to incomplete statistics from The Paper, since November 12, 23 listed companies have issued resignation announcements for 24 independent directors in the past week, and most independent directors have applied for resignation due to personal reasons. Among them, there are many cases where independent directors require listed companies to disclose their resignation as soon as possible.
According to The Paper’s calculations, since November, the number of A-share listed companies that announced the resignation of independent directors is 33, a year-on-year increase of 57% and a month-on-month increase of 65%.
In this regard, an industry insider told The Paper: “In the first-instance judgment of the Kangmei Pharmaceuticals case, all five independent directors were sentenced to bear substantial joint compensation. This is one of the reasons why many independent directors have resigned recently. At present, independent directors Become a job where the risks outweigh the benefits.”
On November 12, the first-instance judgment in the Kangmei case fell. Among them, five independent directors were sentenced to bear joint and several liability ranging from 5% to 10%, with amounts of 123 million yuan and 246 million yuan respectively. In most A-share listed companies, independent directors are generally paid around 100,000 yuan a year.
In the Kangmei case, five independent directors were convicted of huge joint and several liability, which was the first time in the A-share market.
Independent directors “resignation wave”: 33 A-share companies announced the resignation of independent directors since November, a year-on-year increase of 57%
According to incomplete statistics from The Paper, 23 listed companies have issued announcements regarding the resignation of independent directors since the Kangmei case was pronounced on November 12.
Specifically, on November 12, three listed companies, including ST China Ting (601113), Xinwangda (300207), and ST Koichi (300356), took the lead in issuing independent directors’ resignation announcements.
On November 13, two listed companies including Jiugang Hongxing (600307) and Xingyuan Material (300568) issued an announcement on the resignation of independent directors.
From November 16 to November 20, 3, 4, 4, 2, and 5 listed companies respectively issued announcements on the resignation of independent directors. Specifically:
On November 16, China Malaysia Transmission (603767), Daheng Technology (600288) and Grandland Group (002482) respectively issued announcements on the resignation of independent directors.
On November 17, 4 listed companies including Zhangzhou Development (000753), ST Rongtai (600589), Liaoning Chengda (600739), and Mulinsen (002745) respectively issued announcements on the resignation of independent directors.
On November 18, SUMEC (600710), Huadian Energy (600726), True Vision (002771) and Kaishan (300257) respectively issued announcements on the resignation of independent directors.
On November 19, Fuchun Environmental Protection (002479) and Yuxin Technology (300674) respectively issued announcements on the resignation of independent directors.
On November 20, 5 listed companies including Kexin Development (600234), Zhongxin Tourism (002707), Jinhua (600080), Guanghong Technology (300735), and UBoxun (300531) respectively issued notices regarding the resignation of independent directors. announcement.
Wind data shows that since November this year, only 33 listed companies have announced the resignation of independent directors. In the past week after the Kangmei case was judged, there were 23 companies, accounting for as much as 70%.
In addition, in October of this year, only 37 A-share listed companies issued announcements of the resignation of independent directors. From October 1st to October 20th, there were only 20 in total. Estimates show that since November this year, the number of listed companies that have announced the resignation of independent directors has increased by 65% from the previous month.
From November 1st to November 20th, 2020, Wind data shows that 21 listed companies have issued announcements about the resignation of independent directors. Calculations show that since November this year, the number of listed companies that have announced the resignation of independent directors has also increased by nearly 60% year-on-year, which is 57%.
On the whole, in the past three months, more than 30 listed companies have issued announcements about the resignation of independent directors. Among them, there were 37 in October, 33 in September, and 43 in August.
However, it should be noted that the above-mentioned listed companies that have announced the resignation of independent directors do not mean that the relevant independent directors have resigned.
Many company announcements show that the resignation of relevant independent directors will result in the proportion of independent directors on the company’s board of directors being lower than the statutory minimum requirements, so their resignation report will take effect after the company elects new independent directors. During this period, the independent director who proposed to resign will continue to perform the duties of the independent director.
23 companies belong to 14 industries, with the largest electronics sector, and 8 companies with a market value of over 10 billion
Wind data shows that of the 23 listed companies that have announced the resignation of independent directors since November 12, 8 listed companies have a market value (Wind total market value 1 standard, the same below) exceeding 10 billion yuan. Among them, 3 are main board companies and 5 are GEM companies.
Specifically, on the listed sector, 23 companies belong to the Main Board and the Growth Enterprise Market. Among them, there are 16 on the Main Board and 7 on the Growth Enterprise Market.
In terms of total market value, as of the latest closing day, there are 8 companies with more than 10 billion yuan, 3 companies with more than 20 billion yuan, and one with more than 80 billion yuan.
Among them, Xinwangda has the highest total market value, reaching 83.080 billion yuan. Xingyuan Material followed closely behind, with a total market value of 35.116 billion yuan. The total market value of Liaoning Chengda University and Mulinsen exceeds 20 billion yuan, respectively 29.263 billion yuan and 23.257 billion yuan.
The total market value of Kaishan, Yujin Technology, Jiugang Hongxing, and Guanghong Technology all exceed 10 billion yuan, which are 16.534 billion yuan, 13.303 billion yuan, 13.216 billion yuan, and 10.674 billion yuan respectively.
In terms of industry, under the Shenwan first-level industry classification, 23 companies are classified into electronics, electrical equipment, steel, public utilities, chemicals, building decoration, computers, machinery and equipment, automobiles, commercial trade, communications, leisure biology, medical biology, Comprehensive and other 14 sectors.
Among them, there are 4 electronic companies, namely Mulinsen, Daheng Technology, Xinwangda, and Guanghong Technology. There are 2 companies in the public utilities, chemicals, computers, automobiles, commerce and trade, and pharmaceutical and biological sectors. The remaining sectors are all one.
Most independent directors resign due to personal reasons, and many of them have university professors
According to Wind data, among the announcements of the resignation of independent directors issued by 23 listed companies, except for the announcement of the resignation of 2 independent directors by Zhangzhou Development, the rest are all one. Therefore, a total of 24 independent directors are preparing to resign.
As for the reasons for resignation, according to the analysis of The Paper, most of them are the personal reasons of independent directors. At the same time, it also includes job changes and expiry of terms of office.
Specifically, there are 16 independent directors who have resigned due to personal reasons. The listed companies are ST Guangyi, Jiugang Hongxing, Xingyuan Material, Zhongma Transmission, Daheng Technology, Guangtian Group, ST Rongtai, Liaoning National Cheng Kung University, Huadian Energy, True Vision, Kaishan Co., Ltd., Fuchun Environmental Protection, Yuxin Technology, Kexin Development, Uboxun.
Among them, SUMEC’s independent director Chen Donghua resigned because of personal reasons, but the announcement also pointed out the changes in work.
The resignation of independent directors due to job changes also includes Mulinsen’s Tang Guoqing, and Guanghong Technology plans to be hired as the company’s chief financial officer Qiu Lequn.
There are 4 independent directors who resigned due to the expiration of their terms, namely Zhong Mingxia of Xinwangda, Sun Yun of UTS Tourism, Lin Zhiyang and Huang Jianxiong of Zhangzhou Development.
In addition, Wang Huaping of ST China Ting announced that the reason for his resignation was the receipt of the “Administrative Penalty Decision” issued by the Zhejiang Securities Regulatory Bureau.
The Jinhua shares announcement did not disclose the reason for the resignation of its independent director. The announcement stated: “The company received a written document from independent director Zhang Xiaoyan on November 19, 2021, requesting the company to disclose the resignation as soon as possible.”
It is worth mentioning that Wind’s available information and public information show that most of the independent directors who have resigned have a background of university professors.
For example, Xie Deren, the independent director of Liaoning Chengda University, is currently a professor of accounting at the School of Economics and Management of Tsinghua University. Sun Jian, independent director of Huadian Energy, is currently the deputy dean and professor of the School of Accounting of Central University of Finance and Economics. Shi Ximin, independent director of Kaishan, is a professor of accounting at Zhejiang University of Finance and Economics.
In addition, Zhong Mingxia of Xinwangda has worked in Shenzhen University Law School since 1994 and has been a professor since December 2003. Zhou Youmei of ST Guangyi serves as the dean of the School of Accounting, Professor of Accounting, and postgraduate tutor of Nanjing University of Finance and Economics.
The first case of A shares!In the Kangmei case, the independent director was sentenced to a huge amount of joint and several liability, and the remuneration received during his tenure was not sky-high
The penalties imposed on the joint liability of independent directors in Kangmei Pharmaceutical’s case seem to have a significant impact.
In the first-instance judgment of Kangmei Pharmaceutical, the five independent directors were all sentenced to bear a huge amount of joint and several liability. Specifically, the responsibilities shown in the first-instance judgment in Kangmei Pharmaceutical’s case are divided into:
100% of the joint and several liabilities are: Ma Xingtian and Xu Dongjin, the actual controllers of Kangmei Pharmaceutical, Qiu Xiwei, director, deputy general manager, and secretary of the board of directors, Zhuang Yiqing, chief financial officer, Wen Shaosheng, employee supervisor and deputy general manager, Ma Huanzhou, supervisor and independent director, and Guangdong audit agency Zhengzhong Zhujiang Certified Public Accountants (referred to as “Zhengzhong Zhujiang”), Zhengzhong Zhujiang partner and signing accountant Yang Wenwei.
20% of joint liabilities (approximately 492 million yuan) are: Director Ma Hanyao, Director Lin Dahao, Director Li Shi, Chairman of the Board of Supervisors Luo Jiaqian, Supervisor Lin Guoxiong, Deputy General Manager Li Jianhua, Deputy General Manager Han Zhongwei, and Deputy General Manager Wang Min.
Those who bear 10% of the joint liability (approximately 246 million yuan) are: part-time independent directors Jiang Zhenping, Li Ding’an, and Zhang Hong.
Those who bear 5% of the joint liability (approximately 123 million yuan) are: part-time independent directors Guo Chonghui and Zhang Ping.
It can be seen that although the five independent directors were sentenced to bear the lightest liability ranging from 5% to 10%, the amount of compensation paid has all exceeded 100 million. Correspondingly, independent directors receive remuneration from listed companies and cannot cover related compensation.
For example, public information shows that Li Ding’an served as an independent director of Kangmei Pharmaceutical from May 2012 to May 2018; from May 2018 to October 2020, he served as a supervisor of the company. From 2018 to 2020, the pre-tax remuneration received from Kangmei Pharmaceutical was 148,400 yuan, 148,400 yuan, and 168,000 yuan, for a total of 464,800 yuan.
In addition, Zhang Ping served as an independent director of the company from May 2018 to June 2, 2020. From 2018 to 2020, the pre-tax remuneration received from Kangmei Pharmaceutical is 70,000 yuan, 120,100 yuan, and 50,900 yuan respectively, and the total is about 241,000 yuan in three years.
Flush data shows that according to the 2020 annual report, the highest salary of independent directors of A-share listed companies last year was Junshi Biological (688180) Lianping and ROY STEVEN HERBST. During the reporting period, the salary was RMB 5,340,800 and RMB 2,025,200, which were the only two salaries. An independent director who broke through one million.
Correspondingly, the two independent directors of Guangyu Development (000537) will be paid only 300 yuan during the 2020 reporting period. The salary of the independent director of ST Noble (603555) is 500. At the same time, there are not a few people with a salary of several thousand yuan.
In the Kangmei case, five independent directors were convicted of huge joint and several liability, which was the first time in the A-share market. Therefore, the precedent is expected to become an opportunity to improve the independent director system.
It has been 20 years since the independent director system was born. Expert: “Failure to fulfill the rights and responsibilities granted by laws and regulations, and it is not wrong to receive legal sanctions.”
It is worth mentioning that when the independent directors of A-share listed companies stand on the cusp of the storm, it coincides with the 20th anniversary of the birth of my country’s independent director system.
On August 16, 2001, the China Securities Regulatory Commission issued the “Guiding Opinions on Establishing an Independent Director System in Listed Companies” (hereinafter referred to as the “Opinions”). The “Opinions” stated that in order to further improve the governance structure of listed companies and promote the standardized operation of listed companies, listed companies should establish an independent director system.
The “Opinions” show that at that time, the China Securities Regulatory Commission clarified for the first time that the independent directors of A-share listed companies should have the functions and powers they should exercise, as well as the conditions for nomination, election and replacement. Among them, the “Opinions” also particularly emphasized the content that independent directors must have independence.
Regarding the case where the independent director of Kangmei Pharmaceutical was sentenced to compensation of hundreds of millions of yuan, Liu Shuwei, who is currently the independent director of Vanke, Gree Electric, China Optics, and Rouyu Technology, clearly pointed out in a public article: “Relevant laws and regulations of our country have clearly stipulated independence. The rights and responsibilities of directors. As an independent director, he is indifferent to Kangmei Pharmaceutical’s unscrupulous fraudulent activities! Since he has not fulfilled the rights and responsibilities granted by laws and regulations, he has been punished by law and is wronged?”
Liu Shuwei stated that before he became an independent director of Vanke, he declined an invitation to serve as an independent director of a listed company because he could not meet my requirements for performing the duties of an independent director. For example, before signing, I asked for a strict review of relevant materials, otherwise, I refused to sign.
Liu Shuwei emphasized that independent directors should be responsible to investors. I agree that the companies that serve as independent directors are companies that I fully understand and have followed relevant public information for many years. After serving as an independent director, I have to ask the relevant departments of the listed company until I have any questions about the relevant information.
Liu Shuwei believes that Kangmei Pharmaceutical’s fraudulent methods are easy to identify. For Kangmei Pharmaceutical’s such obvious fraudulent behavior, and public opinion has publicly questioned it, as an independent director of Kangmei Pharmaceutical, it should not be unidentified.
Finally, Liu Shuwei asked: “Accepting the invitation to serve as an independent director means that you will perform the rights and obligations granted by laws and regulations. If you can’t do this, why should you serve as an independent director?”
At the same time, Gui Haoming, chief market expert at Shenwan Hongyuan Securities Research Institute, issued a statement that my country’s independent director system has been implemented for nearly 20 years. To break the situation where the controlling shareholder is the dominant shareholder in the board of directors, and the interests of small and medium shareholders are often ignored.
Gui Haoming emphasized that the Kangmei case is very typical. It is precisely because of the inaction of the five independent directors of Kangmei and the chaos of following the actual controllers that Kangmei is able to unscrupulously continue to make fakes, and the amount of fictitious revenue and profits is increasing. Finally, it is exposed because it cannot justify itself. A major scandal in the securities market has also put these independent directors in a situation where they are in a situation where they have committed their violations.
An industry insider told The Paper News reporter: “At present, many independent directors of A-share listed companies are called “flower vases”, which has nothing to do with the fact that few independent directors really watch announcements and conduct investigations in their duties.”
Gui Haoming also pointed out that there have always been some people in the market who are willing to serve as independent directors of listed companies. The reason is that they believe that there is no responsibility for this position. As long as they vote yes, they can get an independent director’s remuneration.
Gui Haoming said: “This is a misunderstanding of the independent director system, and it also reflects the deep-seated problems in China’s independent director system. The lessons here are worthy of a profound summary.”