The 36th meeting of the Central Leading Group for Deepening Overall Reform was held on June 26 morning. It emphasized that it is essential to complete the corporate system and joint-stock system reform of state-owned enterprises (SOEs) by the end of the year in deepening the SOEs reform. It will focus on the construction of the board of directors, improve the corporate governance structure and achieve equal rights with equal responsibilities.
The meeting required strengthening the regulation on the whole process and strictly performing the approval procedures in decision-making to prevent the losses of state-owned assets. Meanwhile, it requires coordinating the reform and stable development of enterprises and safeguarding the legitimate interests of employees.
As an integral part of the SOEs reform, the modern enterprise system with the reform of the corporate system as the core is speeding up. The Economic Information Daily learnt that the State-owned Assets Supervision and Administration Commission (SASAC) will deepen the reform of the corporate and joint-stock systems and the mixed ownership system of central enterprises and actively explore the diversified reform on equities at the group level. Besides, Shanghai, Guangdong, Shandong and Jiangsu have prepared detailed pilot plans to accelerate in the SOEs reform. It is learnt that over 9 percent of SOEs’s subsidiaries have conducted the corporate reform and 68 percent have conducted reforms in the mixed ownership. The construction of the board of directors has been deepened. 85 central enterprises have established standard boards of directors. The number of external directors has reached 389 and professional external directors have reached 26.
“Reforms of corporate system and joint-stock system are accelerating.” SASAC’s deputy secretary general Peng Huagang told the reporter of Economic Information Daily that 92 percent of all-level subsidiaries of central SOEs under SASAC have restructured corporate system by the end of 2016. Dongfang Electric Corporation, China General Nuclear Power Corporation and Alcatel-Lucent Shanghai Bell, and subsidiaries of seven central SOEs such as China Guodian Corporation, China First Heavy Industries Corp. and China Railway Construction Co., Ltd. have completely finished reforming corporate system. Over 90 percent of enterprises under the provincial SASAC have carried out the reform. Specifically, level-one enterprises under provincial SASAC in 19 provinces including Liaoning, Jilin, Jiangsu and Fujian all have accomplished the reform of corporate system.
General Office of the State Council released instructions on further improving corporate governance structure of SOEs in April. It proposed to basically finish corporate system reform of SOEs by 2017 and put forward goals and tasks like solely state-owned and wholly-owned companies should establish board of directors with outside directors accounting for high proportion by 2020.
Li Jin, chief researcher of the China Enterprise Research Institute, said to the reporter that responsibilities are not clear, restriction is not tough, and there’s lack of check and balance. These are some problems in inner management of SOEs. Thus, SOEs reform faces two problems. One is about governance of SOEs, which means it is urgent to practice system of board of directors. The other one is about system and mechanism, which should be clarified.
“After the reforms of joint-stock system and corporate system are finished, modern corporate system should be established, governance structure reform should be deepened to truly tackle the problem that board of directors exist nominally only. The responsibilities of board of directors should be practiced in accordance with law,” said an SASAC’s authority.
In the opinion of Li, special attention should be paid to how level-one subsidiaries of central SOEs restructure corporate system and joint-stock system and how qualified state-owned listed companies conduct mergers and acquisitions via equity, cash and financing.
Many experts indicated that promoting holistic listing of SOEs is an important trend of SOE corporate system reform, which can solve the disadvantages of system and mechanism of SOEs, optimize equity structure, create conditions for mixed-ownership reform, provide system guarantee for protecting legal interests of small and medium investors or shareholders, help state-owned capitals to become stronger and excellent, help establish perfect modern enterprise system, and help separate government functions from enterprise management, separate government and capital, and separate ownership and management.
Translated by Star Zhang
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