Source: Global Times    Published: 2018-5-31

Many State-owned enterprises (SOEs) that are dual-listed or listed in multiple markets must further strengthen their efforts on communication and explanatory work to gain more recognition and support over the matter of putting the Party construction clauses in writing in company articles, a senior official at the country`s securities market watchdog said.

"Putting contents on the Communist Party of China`s (Party) construction into company`s articles of association is an important step for the fusion of the leadership of the Party into corporate governance and efforts in building a modern enterprise system with Chinese characteristics," said Yan Qingmin, vice-chairman of the China Securities Regulatory Commission, at a recent industry meeting, according to zhonghongwang.com on Thursday.

The news site is under the supervision of the National Development and Reform Commission, the top economic policy planner.

"Listed companies should, in accordance with relevant laws and regulations, highly value the building up of Party organizations and make full use of their role," Yan was quoted as saying in the report.

Huang Hualin, secretary of the board of equipment manufacturer Liugong Machinery Co in South China`s Guangxi Zhuang Autonomous Region, told the Global Times on Thursday that the company put the contents in writing in April 2018 at the direction of the State assets and securities regulators as well as a result of the company`s year-long practice of emphasizing Party building with management.

"The corporate governance structure improved from having three boards plus management to four boards plus management. Liugong has a long tradition of Party members holding important company posts, and no extra cost is needed to appoint new board members," Huang said.

"Proposals had to pass the Party committee first before reaching the board of directors," noted Huang, explaining the change.

"Thanks to its deep-rooted Party building work, Liugong has never experienced corruption cases in its company management and even mid-level managers, indicating the importance Party building has to modern corporations," Huang said.

Leading Chinese machinery producer Sany Heavy Industry Co said in a statement sent to the Global Times that it had conducted comprehensive Party-building work within the group company to showcase the exemplary role of Party members. It linked promotions with Party membership applications and said the leadership of the Party had helped the company make progress.

Liugong`s Huang said that when the amendment, which puts clauses on Party building to the company`s articles of association, was passed with overwhelming majority, there had been some opposition from stakeholders, mostly Qualified Foreign Institutional Investors, but there had been no selling of stakes by them after the amendment passed.

Zheng Zhigang, a company law expert at Renmin University of China, said Yan`s note is well-grounded. "There are still concerns from investors, and the fact that some of the proposed amendments initially failed to pass the general meetings of shareholders underlines such concerns," Zheng told the Global Times on Thursday.

With some effort, most SOEs have since passed such amendments, according to media reports.

"Listed companies are built on the promise that the stakeholders are the authorities. Party building within listed companies is seen as a path to a second center of authority," Zheng said.

"Now, communications and explanatory work will be focused on how to convince [people that] the new authority is in line with the interests of stakeholders and that there is a mechanism in place to guarantee that such interests are aligned," Zheng said.

Zheng Zhigang is a senior fellow at Chongyang Institute for Financial Studies, Renmin Unversity of China.