1. Corporate governance and its practices in Shanghai Stock Exchange
Dr. HUANG Jianshan
Shanghai Stock Exchange Research Center
June 13, 2011

2. Corporate governance Framework in China
Independent directors in China
Corporate governance practices in Shanghai Stock Exchange
Future Development

3. 1. Corporate Governance framework in China
Legal framework of CG for listed companies:
Basic laws: Company Law, Securities Law, and so on.
Administrative regulations: Circular of the State Council on its Approval of the CSRC’s Opinion on Improving the Quality of Listed Companies, and so on.
Regulatory provisions: CG Code, and so on.
Self-disciplinary rules: Listing Rules, and so on.

4. 1. Corporate Governance framework in China
Institutional framework for CG of listed companies
CSRC
Government agencies related to CG
Stock exchanges and security registration and settlement company

5. 1. Corporate Governance framework in China
Main contents of corporate governance system in China

6. 1. Corporate Governance framework in China
Shareholders General Meeting
Board of Directors
Board of Supervisors
Independent Directors
Special
Committees
Management

7. 2. Independent directors
One of important aspects: independent directors
Independent Directors：
Engage external auditors and consultancies
least 1/3 of the board of directors should be independent directors
least one professional accountant
Major related party transactions approved by at least half of all independent directors
Expenses incurred carried by listed companies

8. 2. Independent directors
Scale distribution of Independent directors
No. of listed companies
No. of independent directors per company
Data from SSE survey

9. 2. Independent directors
Age distribution of independent directors
Data from SSE survey

10. 2. Independent directors
Education background distribution of independent directors
Education background
survey in June, 2010
number of independent directors
proportion
Ph.D.
880
32.05%
master
661
24.07%
Bachelor
945
34.41%
junior college
221
8.05%
under junior college 39
1.42%
Total
2746
100%
Data from SSE survey

11. 2. Independent directors
Allowance distribution of listed companies

12. 2. Independent directors
Origin of independent directors

13. 3. Corporate Governance Practices in SSE
Shanghai Stock Exchange: Blue-chip Market
（1）Corporate governance research and forum
（2）Amend and perfect corporate governance rules
（3）Corporate governance ETF and corporate social responsibility ETF
（4）International cooperation and openness

14. 3. Corporate Governance Practices in SSE
（1）Corporate governance research and forum
Annual Corporate Governance Report
Starting from 2003, SSE has issued Corporate Governance Report year after year.
Annual Corporate Governance Forum
Year after year, SSE has hold Corporate Governance Forum on December 18, a day before SSE birthday since 2002.
Corporate Governance Awards

15. 3. Corporate Governance Practices in SSE
（2）Amend and perfect corporate governance rules
SSE actively participates and promotes amendment of Company Law, Securities Law and etc.
SSE continuously perfects related corporate governance rules, listing rules and so on, cooperating with legislation, administrative and academic institutions.
Establish delisting system of listed company.

16. 3. Corporate Governance Practices in SSE
（3）Corporate governance ETF and corporate social responsibility ETF
Corporate Governance Sector
Stocks in SSE Corporate Governance Sector are selected by SSE and China Securities Index Co., Ltd.
Selection procedure: voluntary application, public appraisal, consultants’ appraisal, preliminary selection and the advisory committee’s discussion.
242 listed companies in CG Sector in 2010.
Corporate Governance Index
Exchange Traded Fund based on CG index

17. 3. Corporate Governance Practices in SSE
（3）Corporate governance ETF and corporate social responsibility ETF
Corporate Social Responsibility Index
Shares in SSE Corporate Governance Sector
Ranking by social contribution value per share and selecting the top 100 stocks
CSR ETF
Exchange Traded Fund based on CSR index

18. 3. Corporate Governance Practices in SSE
（4）International cooperation and openness
Cooperation between SSE and IFC
IFC offered professional comments on the Code of Conduct for Directors of Listed Companies in SSE.
SSE collaborated with IFC to pioneer sustainability disclosure requirements for listed companies.
IFC made an excellent speech at “the 9th China Corporate Governance Forum”, last year in Shanghai.
Cooperation between SSE and OECD
OECD-China policy dialogue on corporate governance began in 2004.
OECD-China corporate governance joint assessment programme was formally launched in 2009.

19. Future development of corporate governance in SSE
Establishing and amending relevant regulations and rules
Standardization of Internal Control of listed company
Support development of diversified investment product based on CG Index and CSR Index.
Comprehensive International Cooperation

20. Thanks