SOE amendments strengthen Party role, creating more returns for shareholders

Updated 2017-09-06 10:30:40 Global Times

Driven by the central government's efforts to resolve the weakening and marginalization of Party organizations within China's State-owned enterprises, Party-building rules have successfully been written into articles of association of such enterprises. As a result, an organic type of company governance has emerged under Party leadership.

The Communist Party of China (CPC) has been ramping up efforts with regard to extending its representation in State-owned enterprises (SOEs).

Recently, more and more companies have been including Party building clauses in their articles of associations, which are in-company constitution-like laws.

All centrally administered SOEs have completed their amendments of articles that address Party-building at the group level, which are currently under review and waiting to be published, according to a June 20 report by the People's Daily, the media organ of CPC Central Committee.

A total of 3,076 second- and third-level companies under centrally administered SOEs have adopted the amendments within their articles of association, a goal that all such companies must achieve by the end of this year, the report said.

The amendments generally outline that Party organizations should play a core role, in both leadership and politics, in order to navigate development direction. For example, when major business issues arise, they should first be discussed by Party organizations, and then boards of directors or managing groups can make decisions accordingly.

Leadership confirmed

Wang Jipeng, chairman of Beijing Redetac Management Consulting Co, told the Global Times on Monday that, before the recent collective amendments, Party organizations within enterprises played only a political role, now they will play a leadership role as well. "Previously, the legal status of a Party organization was not confirmed and its responsibilities not specified, as a result, its role was not concrete or normalized, which resulted in the emergence of the weakening, emptying and marginalization of Party building," Wang said.

As an important part of the national governance system, an SOE embodies a unique political disposition and shoulders different corporate social responsibilities, said Wang Jingbo, a professor at the Beijing-based China University of Political Science and Law.

"Putting Party-building content into SOEs' articles of association promotes the specification and systematization of the Party's core role in SOE leadership and politics, a significant measure that will tackle the weakening of Party work within enterprise operations," she noted.

COSCO Shipping, the first SOE to incorporate Party building into its articles of association, altered Party-related clauses in June by adding an independent chapter about the specific obligation of Party organizations, including guaranteeing and supervising the implementation of CPC and national policies within the company.

Sun Jiakang, deputy chief of the Party organization, also deputy general manager of COSCO Shipping, told the Global Times in a note that, according to cadre management permissions, the Party organization can put forward its opinions or advice on nominees selected by the board of directors or general manager, and it can also recommend nominees.

At the end of April, Xinxing Cathay International Group Co, a pilot Party- building SOE selected by the Party committee of the State-owned Assets Supervision and Administration Committee (SASAC), obtained the approval of its amendments, Zhi Wenguang, the secretary of the company's Party affairs department, told the Global Times on Monday.

However, "amendments written on paper are not enough to ensure the concrete role a Party committee plays," Zhi said, adding that specialized and supportive regulations can help guarantee that words of the Party organization are actually put into practice.

For instance, the company has rolled out its own rules for its Party committee regarding its participation in key issue discussions by firstly defining what a "key issue" refers to. Particularly, this clarification of definition relates to the company's strategy and mechanism adjustment, operation suspension, salary adjustment and other major issues, Zhi noted.

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