A Study On The Evaluation System Of Independent Director’s Value From S-C-P Perspective

As the common choice of different corporate governance pattern, the initial purpose of building the independent director system is to improve the internal governance level. Such purpose emphasizes the value of independent directors that is to prevent and solve the internal agency problem through supervision in the existing institutional framework. Ironically, the fact is more scandals of listed corporations but less powerful independent directors. The reason why a lot of researches have not practical value is that these researches focus on one or two causes of problem, but ignore other causes and importance. Directors, managers, investors and regulators contend the key reason why independent directors have no effect is that the evaluation mechanism of independent directors hasn’t established. So we are unable to discern what factors hinder the realization of the value of independent directors. Therefore, the key to further promote the value of independent directors is to build an independent director’s value evaluation system.The existing researches regard the value of independent directors as a static result. In fact, the realization of their value is more like a process influenced by many subjective and objective factors in a limited environment. In order to clarify the whole process of the independent directors value realization, an effective analysis method is to abstract the independent director as a job or special worker. In theory of organizational behavior, independent directors achieve its value during such process: firstly, the internal institutional framework of corporate governance have created a system environment for work; secondly, the system mentioned above requires people to perform, to covey value; finally, to observe governance results reflecting whether independent directors play their value. The whole value realization process called S-C-P framework is from institutional to structure to behavior characteristics and to Performance Structure". That is to say, whether independent directors’value is achieved effected by reasonable internal structure, conveyed through the independent director’s subjective behavior, and finally showed from performance. The S-C-P framework comprehensively covers all aspects of the value realization of independent directors.This study focuses on the primary factor-lack of evaluation mechanism that leads to the nonfeasance of the independent director. Based on the S-C-P framework, we establish a value evaluation system and divide into three dimensions including system structure, characteristics of independent directors’ behavior and governance effect. We select different indicators in different dimension, use entropy method to determine the weight of each index and dimensions, form a comprehensive independent directors value index and explore the relationship between evaluation index and enterprise performance.This paper uses large sample data of private enterprises in Zhejiang to promote independent directors’ value evaluation system in practice. And specific numerical ranking reflect the position of the whole industry. Then the enterprises choose the right way to solve problem according to the actual needs and difficulty importance, and enhance the development of enterprise through the improvement of internal governance level. Our research results show that as below:the realization of independent directors’ value is significantly influenced by reasonable system structure, independent directors attitudes and behavior and supervision effect. And as the transmission mechanism, independent directors’ behavior is especially important. After cluster analysis, we find the sample can be roughly divided into three categories. Firstly, the general manager of Beingmate has appropriate stock ownership which gives him the incentive to work, but the chairman of the board is not the manager and do not have any share, that protect the independence of board.. Secondly, independent directors should say "no". The action that says "no" is an important behavior to show independent directors’ responsibility. Thirdly, the pattern that the large shareholders do not absolutely control the share and the manager has a small amount of ownership can promote the realization of the value of independent directors. In regression analysis, only governance effect directly impacts on the performance. This shows that even if internal governance behavior improvement has small proportion in value evaluation index, but produces an important effect on business performance.enterprise system structure, working environment, the duties of independent directors, the actual work performance and other factors are through the improvement of internal corporate governance environment, the role of the business, and not a direct effect on the performance of the company. Therefore, enterprises should take purpose of improving the internal governance level to accomplish independent directors’ value by means of promoting the system structure and driving independent directors’ positive attitude and behavior.