"The reality has ruined the original intention of introducing the independent director system to protect smaller investors," Dong said.

"If independent directors are handpicked by majority shareholders, how can they represent the interests of minority shareholders and turn against the people who brought them on board?" said Xu Feng, a partner at Shanghai Huarong Law Firm.

Xu believes it all boils down to the issue of representation. He cited a study his law firm conducted showing that most directors removed over the past few years had one thing in common: They failed to exercise their due diligence to ensure corporate compliance and represent minority shareholders.

Xu urged regulators to reform the current system, under which many directors are nominated by majority shareholders.

"There should be voting proxies for small and medium shareholders. While retail investors can share the growth of a public company, they should have these proxies to decide company matters on their behalf," Xu said.

"Such proxies have already been introduced to represent institutional investors such as private equities and other investment funds in public companies, and they could represent retail investors in the future," he added.

Exodus

The employment of retired government officials as independent directors has been a target of criticism among the public.

In July 2013, Sinotruk Hong Kong Ltd., a Hong Kong-listed subsidiary of state-owned China National Heavy Duty Truck Group, announced the appointment of three former senior officials as its independent directors.

The three appointees—Shi Xiushi, former Governor of southwest China's Guizhou Province; Han Yuqun, former Governor of east China's Shandong Province; and Cui Junhui, former Deputy Director of the State Taxation Administration—were each promised an annual pay of 180,000 yuan ($29,016).

However, the three resigned amid public and media questioning only 20 days after their appointment. The public was worried about possible corruption and unfair market competition due to the influence of the former officials.

Statistics from the financial information server 10jqka.com.cn show that there were about 5,760 independent directors employed in companies listed on China's Shanghai and Shenzhen stock exchanges in September 2013, among whom 2,590, or 44.9 percent, had worked in government departments, according to a report of the China Youth Daily.

Their working areas were mainly related to auditing, taxation, finance, law and human resources, the report said. It also revealed that more than 30 of them were retired officials who had acted at the ministerial level, and more than 100 used to be mayors. More than 720 reportedly had assumed posts equivalent to head of a county.

"Connections with the government have been regarded by many companies as important corporate resources," said Gao Minghua, an economics professor at Beijing Normal University.

"We tend to choose those who are well-connected and can be helpful to the company," a board secretary of a Shanghai-based listed company, surnamed Dong, told Xinhua News Agency.

A public company manager, who declined to be named, admitted that companies employ former officials as independent directors for their influence and "coordination abilities" in business circles.

"However, it is just the extensive government connections owned by the ex-official-turned-independent directors that raises questions over ethical practices and breeds collusion between business and government," said Zhang Huiming, a professor at the School of Economics at Shanghai-based Fudan University.

Besides, despite years of political experience, these former officials, some in their 70s, may not have sufficient economic expertise to perform their duties as independent directors.

"Some of these ex-officials don't even attend board meetings and don't vote on the major decisions of their companies," said Liu with China University of Political Science and Law.

"The ideology of officials is to obey and implement, while what independent directors need to do is oppose," said Gan Peizhong, a professor at Peking University's Law School.

In October last year, as part of an anti-corruption campaign, the Organization Department of the Communist Party of China (CPC) Central Committee issued a circular, banning incumbents and college personnel from assuming posts outside their office.

The circular also stipulates that only those retired from their government role for more than three years are allowed to take up jobs at companies under relevant authorities' approval.

Public disclosures of more than 200 listed companies over the past months show that a number of former high-ranking government officials have given up board seats.

People's Daily, the CPC's flagship newspaper, said in a commentary on June 9 that the surge in resignations by ex-official-turned-directors has provided a good opportunity for the government to withdraw from the marketplace.

It also said that though hiring officials as board members may have proved beneficial in the short term, such decisions will not help a company in the changing market environment and does no good in cultivating sound corporate governance.

Some experts suggest transparency in the independent directors' work and more supervision from the media and the public.

Zhu Lijia, a professor with the Chinese Academy of Governance, said that retired officials must be banned from assuming such posts in the industries and places they used to work in order to avoid nepotism.

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