2024 Board Director Training——Progress and Outlook of Corporate Governance in the Age of Change

Recently, the Deloitte China Corporate Governance Center (DCCGC) held its 2024 2024 board director training at the Beijing Winland Office, with the theme " Progress and Outlook of Corporate Governance in the Age of Change" International renowned corporate governance expert, Chair Professor at Nankai University, and Director of the China Institute of Corporate Governance, Li Wei'an, delivered a keynote lecture on "Trends in Corporate Governance Theory and Practice under the New Company Law." You Zhongbin, Deloitte AI Institute Co-Managing Partner, shared a special report titled "Widening Application through Good Governance: The Role of the Board in AI Governance in the New Era." Kurt Tan , Chief Growth Officer of Deloitte China, gave an openning speech on behalf of the company, and David Wu, Vice Chairman of Deloitte China, made conclude remarks. Lawrence Chen, Partner in charge of the DCCGC, hosted the meeting.

Kurt Tan, Deloitte China Chief Growth Officer 

Kurt Tan, said in his opening speech that the annual director training organized by DCCGC aims to provide a high-level platform for directors, secretaries of the board, and senior professionals in corporate governance to understand the dynamic trends in the development of corporate governance, exchange research findings and practical experiences in corporate governance. It helps participants to have vision, understand reality, clarify fundamentals, and respond quickly in the face of uncertainty in the external environment, providing clear guidance for the company's development path.

Li Wei'an, Chair Professor of Nankai University and Director of the Institute of Corporate Governance of China 

Professor Li Wei'an, the president of the Institute of Corporate Governance of China, pointed out that the "Company Law" of 2023 aims to "perfect the modern corporate system with Chinese characteristics and promote the entrepreneurial spirit," clarifying the direction of corporate governance reform from an administrative model to an economic model. It fully considers the practical progress and improvement requirements of corporate governance in our country, maintaining substantial consistency with the "G20/OECD Principles of Corporate Governance (2023 Revision)." Specifically:

• The new "Company Law" respects the autonomy rights of enterprises, allowing them to choose between a "dual system" and a "single-tier system". It clarifies that limited liability companies and stock limited companies can establish an audit committee composed of directors in accordance with the provisions of the articles of association, exercising the powers of the board of supervisors stipulated by this law, without setting up a board of supervisors or supervisors.
• By adjusting the relationship between the board of directors, shareholders, and management, the board of directors has been granted more operational and decision-making powers, further strengthening its strategic leadership role.
• Enhance the protection of employees' rights and interests, expand the scope of setting employee directors, clarify that companies should fully consider stakeholders when undertaking social responsibilities, and encourage companies to issue social responsibility reports.
• Implement the responsibilities of shareholder contributions, strengthen the responsibilities of controlling shareholders/actual controllers, and pay more attention to the protection of the rights and interests of minority shareholders.
• The introduction of a class share system, clarifying the definition of class shares and their requirements for subscription and voting, is beneficial for technology innovation ventures to go public and raise funds for sustainable development.
• In response to the achievements of state-owned enterprise reforms, the scope of solely state-owned companies has been expanded to state-funded companies, clarifying the legal status of party organizations participating in corporate governance, and establishing a joint governance mechanism of "party organization - investor".

Professor Li Wei'an also shared his views on several cutting-edge areas of current corporate governance, including green governance, emergency governance, and AI governance. Professor Li stated that the future of corporate governance for Chinese enterprises should embed environmental and social responsibilities, integrating "natural green" and "social green" into green governance; better combine resilience and sustainable development to enhance emergency governance capabilities; and establish an AI governance orientation that is "oriented towards goodness," elevating the existing AI governance of algorithms, rules, and data at the technical level to the stakeholder level of AI governance.

You Zhongbin, Deloitte AI Institute Co-Managing Partner

You Zhongbin, stated that the application of AI in enterprises is transitioning from a "revolution of tools" to a "tool of revolution." As the latest trend in AI, generative AI is going through a process of rapid advancement across various industries, from replacing some manual labor to significantly improving work quality and efficiency, mining useful information from big data to generating valuable market and customer insights, and promoting the transformation of enterprise business models and organizational strategies. It is building new business models and operational mechanisms based on AI. In order to seize the tremendous development opportunities brought by AI, it is necessary to focus on four key elements: vertical scenarios, data infrastructure, orchestration organizations, and cognitive education.

Yu Zhongbin pointed out that with the deepening application of AI, we must be aware of the new risks it may bring, including privacy risks, talent risks, amplification of biases, algorithmic discrimination, malicious abuse, and energy consumption. The responsible use of AI and maximizing its value cannot be achieved without the participation of the board of directors. According to Deloitte's global survey, the board's engagement in AI issues is insufficient, and their understanding of AI is relatively limited. In the process of enterprises promoting the large-scale application of AI, the board should assume more responsibilities in AI governance, including overall governance and supervision (including ethical application), strategic formulation (including related AI policies), risk and opportunity management, and supervision of AI application and deployment. Overall, the board can strengthen its AI governance responsibilities from three aspects: incorporating AI issues into the board meeting agenda as a strategic issue; determining the AI governance structure and assigning AI-related responsibilities within the board; assessing and improving the AI literacy of board members.

David Wu, Deloitte China Vice Chair

David Wu expressed his gratitude to Professor Li Wei'an and Partner You Zhongbin for their high-level professional sharing. The new "Company Law" sets its legislative purpose on establishing a modern corporate system and promoting the entrepreneurial spirit. The establishment of a modern corporate system is inseparable from the modernization of corporate governance, which is the micro-foundation for promoting national economic development and the modernization of national governance capabilities.

The DCCGC will focus on three tasks in the future. The first is to support Chinese enterprises in writing a good chapter on AI governance in the "Fifteenth Five-Year Plan". The second is to increase the proportion of women on boards and in senior management, leveraging women's leadership to enhance the talent diversity of boards and senior management. The third is to promote the role of board secretaries in taking on the responsibilities of the chief governance officer within the company. In addition to continuing to share research findings with directors, board secretaries, and corporate governance professionals, the Deloitte China Corporate Governance Center will also utilize the network resources of the Deloitte Global Board Project to support Chinese enterprises in exchanging good practices in corporate governance with international counterparts.

Nearly 50 directors, secretaries of the board, directors of board offices, and senior professionals in corporate governance from well-known enterprises such as the China Association for Public Companies, China Banking Association, Central Huijin, Industrial and Commercial Bank of China(ICBC), China Construction Bank(CCB), China International Capital Corporation(CICC), China National Petroleum Corporation(CNPC), China State Construction(CSCEC), China Railway Group Limited(CREC), State Power Investment Corporation(SPIC), Citic Bank, Digital China, Naura, Beijing Bank, Beijing North Star, Beijing Construction Engineering Group, Beijing Capital Group, BBMG Corporation, Beijing Enterprises Group, and Xiamen International Bank attended the training on-site. In addition, more than 30 senior professionals in corporate governance participated in the training online.