The Strength of Commercial Banks Depends on That of Its Board of Directors

2007-11-8

21st Century: You let directors to really execute their power independently, and do they have certain difficulty in executing their power?

Dong Wenbiao: In Chinese banking industry, CMBC is the first to formulate the Regulations on Directors for Duty Fulfillment and Self-discipline. These regulations makes clear all directors’ obligations, basic duties, requirements on duty fulfillment, improper behaviors and accountability for breach of duty, and evaluates and reports the situation of all directors’ fulfillment. Has any other bank done this! What duty you shall fulfill as a director can be found in these Regulations. For example, connected transactions shall not be carried out. Any previous connected transaction shall be explained and disclosed, and each director shall write a promise letter (honesty guarantee) for his own explanation, as media have seen. CMBC issued a report with respect to connected transactions this year, which is the effect of corporation governance.

On-duty System for Independent Directors

21st Century: I hear that there is an “on-duty” system for CMBC’s independent directors: they are paid 10,000 yuan for each on-duty day, and shall be penalized for each day’s absence of duty by deducting 10,000 yuan. It is true? If so, how this system was established?

Dong Wenbiao: Yes. At present, other banks have no system like this. We formulated the Working Procedures for Special Committees of the Board of Directors, requiring independent directors to go on duty in our bank each month. Why did we do so? An important objective of establishment of special committees is to exert the function of independent directors and to strengthen the effectiveness of work by the Board. There are six special committees under CMBC’s Board of Directors, among which the offices of president of five special committees is served by independent directors. However, in general the independent director is a part-time job, and thus they have hardly time and energy to fulfill their obligations as directors.

　　Since March of this year, we have implemented an on-duty system for independent directors, requiring them to go on duty 1-2 days for each month, and if come, they will be rewarded. We allocated special offices and office equipments for independent directors, and designate full-time secretaries for each committee to collect all sorts of materials and information for directors. Thus, six committees start to normally operate.

21st Century: In general, what is the work when independent directors are on duty?

Dong Wenbiao: Seen form the situation of implementation, main work when independent directors are on duty is: to study the working items of his committee; to study and determine motions made by the committee; to hear the working report from the management or departments of headquarters; to discuss on relevant systems, etc.

　　Each committee may, in accordance with the working plan by the Board of Directors, divide its duty, make clear this year’s working objective and ideas, and arrange the progress of implementation of all sorts of work in order of importance and urgency. Let’s take the 2007’ working plan for the strategic development committee as example: This committee plans to promote CMBC to realize three important breakthroughs: the first is to explore, together with main business departments and comprehensive management departments, the market orientation for its important business; the second is to positively explore a way where a bank carry out diversified operations; the third is to promote the bank to make breakthroughs in its internationalization.

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