- Shanghai government issued new provisions on supervision of concurrent position of the leaders in state owned enterprises.
- The implementation of the provisions is the deepening of the SOE reforms initiated from the end of last year with regard to improvement of company governance and utilization of human resource.
It was reported on April 27, 2014, that the Shanghai government recently issued the Provisions on Strengthening the Supervision of Vertical Concurrent Position of the Leaders in State Owned Enterprises Directly Managed by Shanghai People’s Government (the “Provisions”), which restrict the leaders of state owned enterprises directly managed by Shanghai People’s Government (the “SOEs”) from taking leadership positions in affiliated enterprises. These Provisions are parts of Shanghai’s state-owned enterprises reforms since the issuance of the Opinions on Further Deepening Shanghai State Owned Asset Reforms to Promote Enterprise Development on December 17, 2013, also known as the “20 Article Scheme”, intending to improve the SOE management mechanisms and state owned asset administration and supervision in Shanghai, where the improvement of company governance is emphasized.
These Provisions were issued as a result of a survey taken last year that found that more than two thirds of leaders in SOEs act as leaders or officers in affiliates. Though the whole text of the Provisions remains to be published, the main points according to reports from major media in China regarding these Provisions as follows:
- In principal, leaders in SOEs will not be permitted to take a concurrent position in affiliated enterprises in general.
- Only under certain circumstances where concurrent position is of necessity may such leaders concurrently hold positions in affiliated enterprises. In such cases, they cannot hold more than two positions, subject to the filing with the Organization Department of Shanghai Municipal Committee of the Communist Party of China (“Organization Department”).
- Under extremely special circumstances where the leaders in SOEs are necessary to take more than two concurrent positions, such concurrent positions should obtain prior approval by the Organization Department or State-owned Assets Supervision and Administration of Shanghai.
- The leaders shall never act as leaders in vertically affiliated enterprises with interest conflicts, and will not be permitted to pay compensation for the held concurrent position(s) in any case.
- The SOEs shall correct any non-compliance concurrent positions within a specified period, otherwise the responsible SOEs and leaders may receive administrative or even criminal liabilities.
The Provisions aim to achieve the goal of making the SOEs to
be governed more in accordance with the laws and market-oriented economy to reduce opportunities for corruption and to
enhance efficacy for operation in SOEs. The reforms, although
positive, will be challenged by the deeply rooted bureaucratic culture, which means the current progression will be a long term revolution
that needs to be pushed.