ACGA features in the International Financial Law Review: Kangmei fraud case sets precedent for corporate governance


Nana Li, Research and Project Director, China, features in an article of the International Financial Law Review (IFLR), “Kangmei fraud case sets precedent for corporate governance”.

Nana’s comments are quoted below.

“Similar to the Enron accounting fraud case in the early 2000s where the accounting firm Arthur Andersen was brought down, in the Kangmei case, it is not only the company itself that has to be responsible but also the accounting firm……The case has made it clear that China wants to raise the cost of misconduct and market breach.”

“The whole point of the registration-based system is to have less regulatory interference, but China is not ready yet,”

“It’s a pretty bad situation……China doesn’t have a broad candidate pool of independent directors anyway, this will lead to a resignation wave of independent directors that are terrified of the responsibilities that come with the role. The goal of having independent directors is for them to monitor management, but in China, everybody knows that they do not have power, they are more like a ‘vase’ than real directors in many cases,”

“According to our report, Awakening Governance, published in 2018, salaries for independent directors in China have gone down in the past 10 years because while companies expect independent directors to add value, it is difficult when they have no say……Most companies are just filling independent director roles to meet regulatory requirements.”

“There has been reluctance because independent directors have not been able to add value……The regulators can’t force companies to increase compensation for independent directors if they do not want to.”

To read the full article, please visit IFLR.