The possible solutions
Based on the previous discussion, the independence problem of the supervisory board, both in form and function, blurs the monitoring line of the two-tier board, making it difficult for the supervisors to observe and evaluate the conduct of the board of directors objectively. This weak monitoring left a loophole for the board of directors and funders for self-interest and harm to other stakeholders. Therefore, improving the independence of the supervisory board in terms of legislation and practice is one of the key elements for supervisors to exercise its monitoring functions better.
The first issue to be resolved is the dual appointments to the NPRI. This issue of independence is the most important one. Still, it is also the easiest one to be banned by legislation: referring to the Shanghai Official Guidelines, it stipulates that the members of the Board of Directors and their close relatives are not to be elected as supervisors, and the accounting officers are not to be elected. This approach has significant results and is also consistent with international practices. This standard also applies to the Chinese NPRI because it is in line with the Chinese charitable traditions. Not that the US law controls the independent directors must have no direct financial relationship with the organisation. The Chinese non-profit organisation always elects donors as supervisors to improve the reputation of the organisation and increase donations. Therefore, the ban on dual appointments in the Chinese NPRI can formally improve supervisory independence.
Compared to dealing with formal independence, dealing with the functional independence problem of the NPRI Supervisory Board is more complicated. Because the Supervisory Board is accountable to multiple stakeholders, including recipients, funders, regulators, it is necessary to prioritise the different stakeholders and empower them to participate in the election of the Supervisory Board. This study believes that beneficiaries (aged residents and their relatives) in the NPRI are in a weak position and that it is difficult to impose restrictions on organisational governance. Moreover, due to its physical or mental deficiencies, it is difficult to withdraw funds and leave the NPRI, and it is difficult to obtain information on organisational governance. Compared to the aged residence, although the funders and regulators are considered to be the “key stakeholders” of NPRIs, as they are in an advantageous position to control the funds and human resources of NPRIs and their operations. But the control and accountability of these stakeholders can be multi-faceted: for example, the funders can elect the original board of directors, have a voice through donation (or stop donation) or even bring a lawsuit against the wrongdoing of the board. The regulators can also control and monitor the governance of the organisation through administrative inspections, administrative penalties, give subsidies (or Withdraw government subsidies).
Therefore, this study believes that in the election of the board of supervisors, due to the poor status of aged residence and the importance of voice in governance, the aged should be given priority to strengthening their power to elect supervisors. Related to this, the organisation’s employees, as stakeholders providing services directly, should also participate in the election of the supervisory board.
In summary, the election of the Supervisory Board should be governed by the principle of multi-stakeholder participation. The beneficiaries, employees, funders and supervisors of the organisation should take part in the elections. If the aged are unable to participate in the election of the Board of Supervisors due to physical conditions, the local aging association and the Board of Trustees may be elected on behalf of the aged. This situation may be referred to as the parent committee system of kindergartens and primary schools.