Incentive of human capital and independent director for corporate management

From the human capital's perspective, this paper casts light on the issue as to the independent directors' incentives. The emergence of independent directors was derived from the failure of early corporate governance, notably the ineffectiveness of the board. Nevertheless, positive research couldn't provide strong evidence to prove that independent directors would play an effective role in corporate governance. Devoid of the concept regarding independent directors as human capital, we could not expect independent directors to be effective in corporate governance. This paper provides analysis to the status quo of the independent directors' incentive mechanism. Based on principal- agent theory and contract theory, this paper holds that independent directors, expected to act properly, should be galvanized according to their characteristics of human capital. Meanwhile, the defects of the incentive mechanism as to independent directors in China are explored.