As an independent director, the law professor of Peking University questioned the company’s financial problems for many times and proposed to hire an independent accounting firm to assist in reviewing the financial report. He was rejected and finally “reluctantly” applied for resignation
On March 31, Shenzhen Laibao High-Tech Co.Ltd(002106) received a letter of concern due to the independent director’s objection to the 2021 annual report of the company, which aroused the attention of the market. Since then, the statement of the Securities Department of the company that “the power of independent directors cannot be magnified indefinitely, otherwise the workflow can not be carried out easily” has once again aroused heated discussion on the problems existing in the current independent director mechanism.
independent director’s letter of questioning the company’s financial report
On the evening of March 30, Shenzhen Laibao High-Tech Co.Ltd(002106) released the annual report of 2021. The company achieved annual revenue of 7.682 billion yuan, a year-on-year increase of 13.79%; The net profit was 491 million yuan, a year-on-year increase of 12.10%. For this seemingly good report card, Jiang Daxing, an independent director of the company, said that he disagreed with the financial data such as its operating revenue, accounts receivable, inventory count and profit, which could not guarantee the authenticity, accuracy and integrity of the company’s 2021 annual report.
Statistics show that since February 2014, Jiang Daxing has been a professor and doctoral advisor at the school of law of Peking University; He has served as the independent director of Shenzhen Laibao High-Tech Co.Ltd(002106) since May 2016. In addition, Jiang Daxing has also served as an independent director of Jinzhou bank, Langold Real Estate Co.Ltd(002305) Co., Ltd., Hubei Radio and Television Information Network Co., Ltd. and other companies since 2011.
As early as January this year, Jiang Daxing launched a debate with the company’s audit institutions and the board of directors on the company’s financial issues.
On January 24, the certified public accountant of Shenzhen Laibao High-Tech Co.Ltd(002106) audit institution Tianjian accounting firm received an email sent by Jiang Daxing, which was about the reply to the first communication with all independent directors of the company and all members of the audit committee of the board of directors on January 14, and requested Tianjian accounting firm to pay special attention to the accuracy, authenticity and rationality of the recognition of the company’s operating revenue in the audit work.
Shenzhen Laibao High-Tech Co.Ltd(002106) said that with regard to the special concerns of independent director Jiang Daxing, the certified public accountants made timely and corresponding replies through on-site video communication meeting on January 25, email reply on February 13, email communication on February 22 and email on March 20.
However, according to Jiang Daxing’s statement, the early audit institutions only gave procedural replies to his letter of concern, which made him have reasonable doubts about the relevant financial data he was concerned about. After that, only when Jiang Daxing proposed to hire a new accounting institution to review the financial statements and would vote against the proposed renewal of the audit institution, the certified public accountant of the audit institution would give a specific reply.
On March 16, Jiang Daxing proposed to Shenzhen Laibao High-Tech Co.Ltd(002106) hire a certified public accountant to review the annual report, but the company believed that this behavior was not a legal procedure and could be implemented only after it was approved by all independent directors and the audit committee. At the same time, the company emphasizes that the annual report data is confidential and shall not be disclosed.
In addition, Jiang Daxing also asked Xiong Chuxiong, the head of the company’s Audit Committee (accounting professor of Shenzhen University), to judge the authenticity of the annual report, and asked how he ensured the authenticity of the company’s annual report and through what investigation methods? Xiong Chuxiong said that he believed that the company’s financial report was true and that there would be no risk for independent directors.
However, Jiang Daxing believes that the investigation measures taken by him can not convince him of the accuracy of his judgment by truthfully investigating and looking at the matching relationship between cash flow and operating income. Because the time for each field visit of independent directors is quite limited, and the matching relationship between cash flow and revenue can be falsified.
In the end, Jiang Daxing resigned from the company either because he had no choice or because he was alone. However, since the number of independent directors will be less than one-third of the number specified in the articles of association, he will continue to perform his duties.
On March 31, the Shenzhen Stock Exchange issued a letter of concern, asking independent director Jiang Daxing and the audit institution to explain the details and reply contents of the financial declaration note letter and even the audit procedures one by one, and submit and disclose the explanatory materials before April 6.
is it “rare” due diligence or loss of professional judgment
Now, the dispute has attracted a lot of attention. Some investors praised Jiang Daxing as a “rare” due diligence independent director, but others questioned Jiang Daxing’s professionalism in financial level and whether there was a situation that caused the storm due to emotion or other reasons.
At the same time, in response to this incident, the staff of Shenzhen Laibao High-Tech Co.Ltd(002106) Securities Department responded to the media: “the power of independent directors cannot be expanded indefinitely, otherwise the work process can not be carried out easily.”
However, many people in the industry believe that the final result of the “independence case” of Dong Kang is worthy of doubt.
\u3000\u3000 “Although Professor Jiang Daxing is less professional in finance than another independent director, Professor Xiong of accounting and audit institution, Professor Jiang raises questions in accordance with procedures, which is a sign of the legitimate exercise of the rights of independent directors. The company should actively provide support to the independent directors for investigation. No matter what the result is, Professor Jiang has the right to raise objections to the authenticity of financial statements during the term of independent directors, and is also obliged to submit the basis for raising objections to regulators or the public To the public. ” A person who has served as a director of a listed company for many years told the reporter of Securities Daily.
“As an independent director of the company for many years, Professor Jiang questioned the 2021 annual report and solved his doubts through Professor Xiong, and still adhered to the original point of view, which is obviously an act of actively performing his duties.” Tian Yong, the chief lawyer of Guangdong Shengma law firm, also thinks so.
Tian Yong believes that the establishment and improvement of the independent director system is a necessary act to reflect the level of corporate governance, balance corporate power, protect the interests of investors and prevent major risks. However, in the current working environment of independent directors, it is normal for independent directors to have “low power” and “weak voice”. If independent directors express objections, the effect is often unsatisfactory. In the end, it is often coerced by the majority of the management to reach a “unified opinion”, which still damages the interests of investors. From this point of view, the company’s financial problems exposed by Professor Jiang this time reflect his responsible performance attitude, and deserve the high attention of regulators.
In terms of the performance of duties and responsibilities of independent directors, Pan Helin, CO director of digital economy and financial innovation research center of International United Business School of Zhejiang University, told reporters: “When the independent director has doubts about the company’s decision-making, he should take the initiative to seek the help of professionals and external personnel to verify his judgment. If the independent director has objections, he should actively raise them and negotiate, communicate and verify with the company’s management. If the independent director has objections and the management does not cooperate, it is the problem of the management. At least the independent director has fulfilled his obligations and responsibilities according to law. If the independent director’s final doubts have not been verified, he should be punished Pay attention to whether the independent director’s initial query is reasonable. If the reason for the query itself is reasonable, there is no reason to require the independent director to bear responsibility for raising an objection. “
Finally, in the dispute over whether Jiang Daxing can ask individuals to hire audit institutions to assist in the review, A person who has many years of audit experience and is now an independent director of many companies told reporters: “the personal independence of independent directors cannot be attached to the opinions of all independent directors. If due to the difference of independent directors’ personal professional judgment, all independent directors must take a consistent position in order to adopt supplementary audit on the fraud of listed companies, such independence is about zero in practice, and the independent director mechanism should be continuously improved in this regard in the future.”
