Is there an expectations gap in the roles of independent directors? An explorative study of listed Chinese companies

This paper investigates whether an expectations gap exists in the control, strategic and resource provision roles that independent directors play in the corporate governance of
listed Chinese firms and the factors that affect their performance of these roles. For this purpose, we interviewed Chinese executive directors, independent directors, institutional investors and stock exchange regulators. We find a performance gap but no reasonableness gap with respect to the control and strategic roles. The results suggest that the performance gap may be attributed to such factors as the ill-defined roles, independent directors’ limited amount of time commitment and their lack of competence and objectivity. Interestingly, there is disagreement over the protection of minority interest as the objective of the control role. We find no consensus on the desirability, reasonableness and effectiveness of independent directors’ resource provision role, perhaps because of a pejorative interpretation of this role as an exercise of guanxi.