When the Measures for the Administration of Independent Directors of Listed Companies officially took effect on September 4, 2023, it marked the first dedicated and systematic regulatory framework for China's independent director system. Now, three years after implementation, the A-share independent director regime has undergone a complete transformation from "formal compliance" to "substantive effectiveness," shedding the long-held "vase director" label through top-level institutional restructuring, reformed履职 models, evolved regulatory logic, upgraded governance architecture, and realized market value.

More importantly, the independent director reform serves as a critical component in perfecting modern corporate systems with Chinese characteristics and strengthening listed company governance mechanisms. It has driven structural changes across corporate governance systems, continuously empowering high-quality capital market development and the transition toward value-oriented investing.

Experts interviewed indicate that after three years of intensive reform, China's independent director system has achieved a fundamental reshaping of its regulatory framework, completely addressing previous shortcomings including fragmented regulations, nominal履职 practices, and absent oversight. At the market practice level, independent director performance is no longer evaluated merely on whether directors showed up or performed basic duties, but has formally entered an advanced stage where professionalism of履职, effectiveness of supervision, and governance value addition are the benchmarks, with institutional governance efficiency being continuously unleashed.

A Fully Formed Institutional System

For an extended period, requirements concerning independent directors were scattered across various governance guidelines and regulatory documents, lacking a unified framework and practical operability, resulting in widespread industry pain points such as perfunctory履职 and absent supervisory functions. Against this backdrop, a coordinated multi-tiered reform effort involving the State Council, the China Securities Regulatory Commission (CSRC), stock exchanges, the China Association for Public Companies, and legislative bodies was launched.

In April 2023, the General Office of the State Council issued the Opinions on Reforming the Independent Director System of Listed Companies, serving as the programmatic document for the reform. In August 2023, the CSRC published the Measures for the Administration of Independent Directors, detailing specific requirements across all aspects of the independent director system. The Shanghai, Shenzhen, and Beijing stock exchanges simultaneously revised their listing rules and operational guidelines, converting these requirements into directly binding exchange regulations. Subsequently, the China Association for Public Companies issued the Code of Professional Ethics for Independent Directors of Listed Companies, the Guidelines for Independent Director Performance of Listed Companies, and the Guidelines for Audit Committee Operations of Listed Companies, reinforcing moral "soft constraints" on top of institutional "hard constraints."

The newly revised Company Law, passed in December 2023 and effective July 2024, along with the Corporate Governance Guidelines for Listed Companies and the Articles of Association Guidelines for Listed Companies revised in 2025 and effective January 2026, elevated the achievements of independent director reform to legal and governance guideline levels. Over the past three years, China's independent director system has established a multi-layered institutional architecture encompassing "top-level design, departmental regulations, self-regulatory rules, industry guidelines, and superior legislation," creating a comprehensive, implementable, and accountable systematic governance framework.

Thanks to this fully developed institutional system, independent directors'履职 momentum has been fully activated. Over three years, independent directors have completely abandoned the traditional "passive signing and post-hoc ratification" model, with proactive supervision, pre-decision review, and mid-process intervention becoming the new normal. Taking supervisory letters issued by independent directors as an example, Wind data shows that since September 4, 2023, 49 A-share listed companies have disclosed announcements regarding receiving such letters, totaling 60 letters. These letters predominantly focus on key governance risk areas including related-party transactions, external guarantees, fund occupation, and information disclosure. This "forward-positioned"履职 approach has moved independent director oversight from "post-hoc veto" to "pre-event prevention" and "mid-process intervention."

Meanwhile, the standardization and professionalization of independent director履职 have continued to improve. Qualification reviews now involve substantive vetting, with hard constraints strictly enforced including the three-company concurrent service cap, six-year tenure limits, and cooling-off periods between appointments. The exchanges' "objection equals rejection" mechanism now operates routinely, thoroughly remedying the previous chaos of "multiple concurrent positions and nominal履职." In 2025, the China Association for Public Companies conducted its first-ever performance evaluation of independent directors, with results showing 32.9% rated excellent and 66.7% rated good, indicating significantly improved overall compliance in履职.

Cheng Fengchao, a member of the Academic Advisory Committee of the China Association for Public Companies and President of the Zhongguancun Guorui Financial and Industrial Development Research Association, noted that the most core and substantive achievement of this round of independent director reform is not how many dissenting votes were cast, but rather the fundamental shift in the underlying logic of independent director履职: from emphasizing "identity independence" to demanding "judgment independence," from merely "attending meetings, voting, and signing" to participating throughout major decision-making processes, and from relying primarily on post-hoc accountability to strengthening pre-event review, mid-process supervision, and post-event tracking.

Corporate Governance Architecture Iteration

The impact of independent director reform extends far beyond independent directors themselves, profoundly reshaping the operational logic of Chinese listed company governance. On one hand, the continuous iteration and improvement of the independent director system has effectively driven governance structure upgrades across A-share listed companies, concentrated in two key dimensions: audit committees assuming functions previously held by supervisory boards, and systematically strengthening board effectiveness.

The new Company Law permits companies to establish audit committees within their boards that exercise supervisory board powers, eliminating the requirement for separate supervisory boards. The Guidelines for Audit Committee Operations of Listed Companies issued by the China Association for Public Companies in June 2025 provides detailed requirements on audit committee staffing,履职 standards, and supervisory priorities, including hard constraints on independent director proportions, professional backgrounds, and qualification requirements.

Song Xiangqing, Vice President of the China Society for Commerce Economics, explained to reporters that this arrangement transforms independent directors from "external observers" of the board into "core executors" of supervisory functions. Previously, supervisory board oversight suffered from delayed information access, uneven professional capabilities, and blurred responsibility boundaries. With the audit committee mechanism in place, independent directors with accounting, legal, and other professional expertise are directly embedded into core supervisory positions, moving the oversight checkpoint forward to the board decision-making stage, achieving seamless integration of pre-event review, mid-process verification, and post-event accountability.

From the perspective of board履职 effectiveness, the Measures for the Administration of Independent Directors imposes comprehensive institutional requirements. Independent directors must comprise no less than one-third of board membership; audit committees must be composed entirely of independent directors; cumulative voting is mandatory when electing two or more independent directors; and dedicated independent director meetings have become a statutory履职 platform. These institutional arrangements enhance board independence and effectiveness across three dimensions: personnel composition, election mechanisms, and operational platforms.

On the other hand, the iterative optimization of the independent director system has further solidified their supervisory responsibilities regarding related-party transaction review and controlling shareholder behavior constraints, strengthening proactive prevention of risks such as improper intervention by major shareholders and benefit tunneling. For example, the 2025 revision of the Articles of Association Guidelines for Listed Companies expanded the scope of related-party transactions requiring prior independent director approval from "major related-party transactions" to "all related-party transactions requiring disclosure," substantially broadening the supervisory coverage of independent directors.

"This means more types of related-party transactions now require independent director review, not just major transactions meeting certain monetary thresholds," said Dong Zhongyun, Chief Economist at AVIC Securities. "The series of reforms strictly regulates related-party transaction review, with all high-risk related-party transactions requiring advance independent director approval, significantly raising the operational threshold for benefit tunneling activities such as major shareholder fund occupation, non-fair transactions, and illegal guarantees."

In Dong's view, as the series of independent director system reforms continues to deepen, the standardization level of A-share listed company governance keeps improving. Quality listed companies with diligent independent directors, sound governance systems, and robust internal control mechanisms are gradually gaining full recognition and valuation premiums from the capital market, thereby supporting the market's transition from financing-oriented to investment-oriented.

Multi-Dimensional Policy Combinations

At the three-year milestone, it is evident that China's independent director system is rapidly entering the deep-water zone of reform focused on "efficiency improvement and value conversion." Objectively speaking, however, institutional dividends have not been fully realized. Some structural issues remain prominent, and certain deep-seated履职 pain points are unlikely to be resolved in the short term—these remain critical bottlenecks for further demonstrating reform effectiveness.

Cheng Fengchao noted that the most prominent contradiction in current independent director履职 centers on information asymmetry. Independent directors typically receive processed and compiled meeting materials, making it difficult to penetrate and identify potential risks, which in turn affects the formation of independent professional judgment. Meanwhile, some companies' selection mechanisms lack sufficient independence and professional fit, with reliance on recommendations from acquaintances, controlling shareholders, and management easily creating situations of "nominal independence but de facto dependence."

Dong Zhongyun added that institutional investors' participation depth in corporate governance remains insufficient. Public funds and similar institutions largely limit their voting activities to shareholders' meeting ballots, lacking effective channels for routine collaborative oversight with independent directors. Combined with high exercising costs and low participation willingness among minority shareholders, the collective force of multi-stakeholder co-governance has yet to truly materialize.

Against this backdrop, resolving the practical obstacles in implementing the independent director system and truly converting institutional advantages into governance effectiveness requires multi-dimensional supporting policy combinations. Song Xiangqing stated that in the next one to three years, independent director reform will fully transition from institutional establishment to the effectiveness deepening phase, with the core direction being to complete the closed loop of "selection—履职—incentive—pricing," adapting to the capital market's shift from financing-oriented to investment-oriented.

On one front, the market-based sources of independent directors must continue expanding, broadening the coverage of third-party nominations from investor service centers, improving cumulative voting and independent director talent pool mechanisms, optimizing履职 protections and director liability insurance supporting systems, balancing履职 risks against履职 motivation, and resolving the real dilemma of independent directors being "afraid to speak and unable to speak." On another front, the substantive operation of audit committees must be reinforced, incorporating ESG review and major shareholder behavior constraints into independent directors' routine履职 scope, improving履职 information disclosure and reputation evaluation systems, and converting more governance quality into observable disclosure metrics. Simultaneously, public funds and other institutional investors should be guided toward deeper governance participation, pushing the market to genuinely incorporate governance premiums into valuation pricing systems—making high-quality board governance a key anchor for long-term value investing in A-shares, better serving the capital market reform objectives of protecting minority investors and improving overall listed company quality.