varieties of independent directors in asia a taxonomy · 2018. 4. 10. · varieties of independent...
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Varieties of Independent Directors in Asia A Taxonomy
Dan W. Puchniak & Kon Sik Kim
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The American Independent Director
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The American Independent Director (Ostensibly) Goes Global
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The Assumption that all IDs are (American-style) IDs
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Yesterday’s Asia
“Boards of directors are typically dominated by insiders and hardly have any outsider presence.”
S. Claessens and J. P. H. Fan (2002)
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IDs in Asia have Risen Beyond Expectations
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China: higher percentage of majority ID boards than UK/Australia Singapore: reported a 98% ID compliance rate—higher than UK
Korea: Majority ID board mandatory in large firms—stricter than EU India: 1/3 or 1/2 ID board mandatory if CEO/Chairman
Hong Kong: 1/3 ID board mandatory IDs embraced in Asia
Has Asia Embraced IDs More than the West?
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Japan: Not long ago over half of TSE boards no IDs—but has recently changed
Taiwan: 1/3 boards no IDs—but this has changed In developing Asia IDs are now common
No end to the rise of IDs in Asia
Even Asia’s Outliers are Slowly Embracing IDs
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Diversity & Complexity Revealed
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Who are the IDs in Asia?
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Three Conceptions of Form Thinnest, Thicker & Thickest
Characteristics Personal Characteristics Group Characteristics
US = Mostly corporate executives Asia = academics, government connected, family friends, lifetime employees and keiretsu
US = Whole board IDs except CEO Asia = Varies greatly among jurisdictions from majority to one or two
Position Nature of Board Position Legal Nature of Positon
US = one-tier board with committees Asia = many non-one-tier boards
US = mandatory Asia = optional/hybrid/mandatory
Object of Independence
American IDs are primarily designed to be independent from management
Asia’s IDs are generally designed to be independent from significant shareholders & management
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What Do They Do?
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Diversity in Functions Expected & Actual
Actual Functions General Specific
US = empirical evidence ambiguous Asia = empirical evidence ambiguous
South Korea = Ex-government officials used as clandestine government lobbyists
Japan = Previously reinforced keiretsu
Singapore = Trusted mediators in family firms & purely managerial monitors in GLCs
Expected Functions
US = managerial monitoring on behalf of dispersed shareholders
Asia = historically monitor controlling shareholders on behalf of minority shareholders (except in Japan and Singapore)
Civilian Asian jurisdictions = fix shortcomings of the supervisory board or its local equivalent
Japan = signal government’s effective management of financial crises (evidence this exists elsewhere, but often to a lesser extent)
Singapore = Signal ‘good’ corporate governance to international investors (evidence this exists elsewhere, but often to a lesser extent)
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Shareholder structures
Legal origins of laws Types of Shareholders Functional substitutes
Political economy Cultural norms
Why have such Diverse Varieties of IDs Developed in Asia?
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A Loose Taxonomy
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No Single Concept of the Independent Director
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Convergence and Persistence in Corporate Law and Governance Jeffrey Gordon
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Boards, and The Directors Who Sit on Them Renee Adams
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Thank You
Thank You
Thank You