Core Viewpoint - The governance structure of listed companies is undergoing a significant transformation driven by the new Company Law, with over 1,700 A-share listed companies announcing the cancellation of supervisory boards in favor of audit committees [1][3][4]. Group 1: Legislative Changes - The revised Company Law, effective July 1, 2024, allows companies to establish audit committees within the board of directors to perform the functions of supervisory boards, providing a legal basis for this shift [4]. - The China Securities Regulatory Commission (CSRC) has issued guidelines to align with the new Company Law, allowing companies until January 1, 2026, to complete necessary adjustments [4]. Group 2: Industry Trends - Major state-owned banks, including Industrial and Commercial Bank of China and Agricultural Bank of China, have collectively announced the cancellation of their supervisory boards, with private and foreign enterprises following suit [3]. - Non-listed companies are also adopting similar measures, indicating a broader trend in corporate governance reform across various sectors [3]. Group 3: Benefits of the Reform - The cancellation of supervisory boards is expected to optimize governance structures, enhance operational efficiency, and meet regulatory requirements, leading to a more centralized and effective supervision mechanism [6][7]. - By consolidating supervisory functions within audit committees, companies can reduce management layers, accelerate decision-making, and improve the alignment of oversight with actual business operations [6][7]. Group 4: Challenges and Considerations - While the transition to audit committees is seen as beneficial, challenges may arise in ensuring their independence and professionalism, which are crucial for the success of this reform [9][10]. - The need for a balance between the supervisory and decision-making roles of audit committees is emphasized to avoid potential risks associated with centralization [9][10].

Core Viewpoint - The recent changes in corporate governance structures among listed companies in China, driven by the new Company Law, indicate a significant shift towards abolishing supervisory boards in favor of audit committees, enhancing oversight efficiency and aligning with regulatory requirements [1][2][3]. Group 1: Legislative Changes - The revised Company Law, effective from July 1, 2024, allows joint-stock companies to establish audit committees within the board of directors to perform the functions of supervisory boards, providing a legal basis for this transition [3]. - The China Securities Regulatory Commission (CSRC) has issued guidelines to facilitate this transition, with a one-year grace period for compliance, requiring adjustments to be completed by January 1, 2026 [3]. Group 2: Industry Trends - Over 1,700 A-share listed companies have announced the cancellation of their supervisory boards since March 2023, with major state-owned banks and private enterprises leading this trend [2][4]. - The shift is not limited to listed companies; non-listed firms are also adopting similar governance changes, indicating a broader industry movement towards audit committees [2]. Group 3: Governance Efficiency - The elimination of supervisory boards is expected to streamline governance structures, reduce management layers, and enhance decision-making speed, thereby improving operational efficiency [4][5]. - The concentration of oversight functions within audit committees is anticipated to reduce resource wastage and lower operational costs, including direct expenses and hidden costs associated with communication and coordination [4][5]. Group 4: Challenges and Considerations - While the transition to audit committees is seen as a positive step towards modern governance, challenges remain in ensuring the independence and professionalism of these committees to prevent them from becoming tools of internal control [6]. - Balancing the supervisory and decision-making roles of audit committees is crucial to avoid centralization risks, and industry-specific governance standards need to be established to minimize regulatory arbitrage [6]. Group 5: Future Directions - The integration of ESG (Environmental, Social, and Governance) principles into corporate governance is becoming a competitive focus, with suggestions for dedicated ESG roles within audit committees and enhanced employee representation in decision-making processes [7]. - Proposed reforms aim to create a modern governance system characterized by effective checks and balances, addressing issues related to professional capability, employee rights, and accountability [7].

Core Viewpoint - The governance structure of listed companies is undergoing a profound transformation driven by the new Company Law, with over 1,700 A-share listed companies announcing the cancellation of supervisory boards in favor of audit committees [2][6][7]. Group 1: Changes in Governance Structure - A significant number of listed companies have announced the cancellation of supervisory boards, transitioning to audit committees that will assume supervisory functions [2][6]. - Major state-owned banks, including Industrial and Commercial Bank of China and Agricultural Bank of China, have collectively announced the removal of supervisory boards, with private and foreign enterprises following suit [6]. - The new Company Law, effective July 1, 2024, provides legal grounds for this change, allowing companies to establish audit committees within the board of directors to perform the functions of supervisory boards [7]. Group 2: Benefits of the New Structure - The cancellation of supervisory boards is aimed at optimizing corporate governance, improving operational efficiency, and adapting to regulatory requirements [9]. - The shift to audit committees is expected to centralize and enhance the efficiency of supervision, reduce management layers, and accelerate decision-making processes [9][10]. - This reform is seen as a critical step towards transforming supervision from "formal compliance" to "substantive effectiveness," with audit committees integrating expertise from finance, law, and ESG fields [9][12]. Group 3: Challenges and Future Directions - While the transition to audit committees is generally viewed positively, challenges may arise in ensuring their independence and professionalism [12]. - The success of this reform hinges on maintaining the independence of audit committees and balancing their supervisory and decision-making roles to avoid "centralization risks" [12]. - As ESG principles gain traction, enhancing governance transparency and accountability will become new competitive focal points, with suggestions for dedicated ESG committees and mechanisms to align supervisory effectiveness with compensation [13].

Core Viewpoint - The recent wave of fund companies in China, including Fangzheng Fubang Fund and Yingda Fund, has announced the abolition of their supervisory boards, transferring oversight functions to committees under the board of directors, sparking discussions on governance reform and supervisory effectiveness in the industry [2][4][6]. Group 1: Industry Changes - Yingda Fund was the first public fund company to abolish its supervisory board in July 2023, following a decision by its shareholder, State Grid Yingda International Holdings Group, and approval through democratic procedures [4]. - Fangzheng Fubang Fund followed suit, officially abolishing its supervisory board and dismissing four supervisors after a shareholder meeting [6]. - The actions of these two companies have initiated a broader discussion on the existence of supervisory boards and the transfer of supervisory functions within the public fund industry [6]. Group 2: Legal Framework - The changes in the fund industry are supported by the new Company Law of the People's Republic of China, effective July 1, 2024, which allows companies to choose not to establish a supervisory board and instead set up an audit committee under the board of directors to perform supervisory functions [7]. - The China Securities Regulatory Commission (CSRC) will issue further guidelines by the end of 2024, requiring relevant institutions to complete internal supervisory adjustments by January 2026, promoting a shift from the traditional governance model to a more streamlined structure [7]. Group 3: Industry Trends - The abolition of supervisory boards is not unique to the fund industry; several listed securities firms and major banks in China have also moved to abolish their supervisory boards, indicating a trend across the financial sector [8][9]. - Major state-owned banks, including Industrial and Commercial Bank of China and Agricultural Bank of China, have collectively announced the abolition of their supervisory boards in the first half of 2023 [9]. Group 4: Motivations for Change - The primary drivers for the abolition of supervisory boards include the need to address overlapping functions, reduce costs, and optimize governance [10]. - The traditional supervisory board has overlapping responsibilities with the audit committee, leading to inefficiencies and resource dispersion [10]. - By abolishing the supervisory board, companies can reduce operational costs associated with the board's functioning, such as salaries and administrative expenses [10]. Group 5: Challenges Ahead - Despite the intention to optimize governance, experts express concerns regarding the independence and effectiveness of the audit committees that will assume supervisory roles [12]. - The members of the audit committee, being part of the board, may face conflicts of interest, potentially undermining their supervisory effectiveness [12]. - There are concerns that some companies may merely transfer existing supervisory board members to the audit committee without genuine reform, risking superficial changes in governance [12].