Financial independent director and innovation of internal corporate governance

In the modern corporate system, a typical corporate governance structure is the "separation of four kinds of rights", i.e. the Supreme rights of the shareholders' meeting, the rights of the board of directors to make decisions with regard to investments and operations, the operating and managerial rights of the management authority, and the supervisory rights (the supervisory rights of the board of supervisors and the external supervisory rights of the accounting firm). These four kinds of rights constitute the corporate governance structure of modern corporations. In China's public-listed companies, however, the phenomenon of "dominance by a single shareholder" has rendered the checks and balances invalid, giving rise to the "insider's control'", and "the integration of the four kinds of rights" in the listed company. This paper applies the principal-agent theory to investigate the characteristics of independent directors of listed companies, and holds that financial independent directors of listed companies play a significant role in safeguarding the overall interests and long-term interests of the listed companies and can facilitate the innovation of the corporate governance of China's listed companies through their decision-making and managerial roles in the board of directors and various special committees. This paper also suggests that due to their special status, the role of financial independent directors should be properly understood.