CHINA’S independent directors are quitting once coveted seats on the boards of listed companies, spooked by fines levied on five directors of Kangmei Pharmaceutical Co. that totaled hundreds of millions of dollars.

Independent directors of at least 20 companies listed on the Shanghai and Shenzhen stock exchanges have resigned after a Guangzhou court ruled Nov. 12 that some Kangmei executives and their external accountants were responsible for fabricating its financial statements. They were required to jointly compensate investors for a combined 2.5 billion yuan (US$391 million) of losses.

Kangmei’s five independent directors are each liable for between 5 percent and 10 percent of the amount, equivalent to 123 million yuan to 246 million yuan, according to an exchange filing. They collected less than 200,000 yuan in annual director fees from the firm.

It’s rare for independent directors to be ordered to compensate investors in a civil litigation in China. The mass departures highlight a growing wariness among corporate executives as Chinese regulators crack down on the nation’s private sector. (SD-Agencies)