Regulatory independence, marketization process and the effectiveness of promotion mechanism of SOE senior managers: a study based on the data on position transfer of SOE senior managers during 2003 to 2012

ZHANG Linlin1 LIU Feng2,3 CAI Guilong1

(1.Business School, Sun Yat-sen University)
(2.Accounting Department, Center for Accounting Studies of Xiamen University)
(3.Center for Accounting, Finance and Institutions, Sun Yat-sen University)

【Abstract】The position promotion mechanism is an important institutional arrangement in incentive systems for senior managers of State-Owned Enterprises (SOEs). Its implementation impacts directly on the effectiveness of incentives. In this study, we collect the data on the whereabouts, promotion and demotion of the chairmen, general managers and party secretaries of central and local SOEs after their leavings during 2003 to 2012, and firstly investigate the implementation of the position promotion and evaluation mechanism for SOE senior managers and the preconditions of its effective implementation based on the performance evaluation rules of various levels of State-owned Assets Supervision and Administration Commission (SASAC) on SOEs. We find that the promotion of senior managers of central SOEs relies on their performance and personal abilities. In contrast, under the constraint of political tournament, the promotion of senior managers of SOEs at provincial, prefectural and county levels depends on non-performance political connections or policy burden takings. The promotion evaluation mechanism is implemented differently in central and local SOEs, that is, regulatory independence affects the effectiveness of the promotion mechanism. In addition, compared with the less market-oriented middle and western regions, the promotion mechanism for SOE senior managers in the eastern region of China is more effectively implemented.

【Keywords】 SOE senior manager governance; promotion incentive mechanism; regulatory independence; marketization process;


【Funds】 National Natural Science Foundation (71272079) Key Project of Fujian Provincial Department of Finance and Project of Ministry of Finance of the People’s Republic of China

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(Translated by HOUlei)


    [1]. ① The stock option as an incentive is not widespread adopted among SOEs due to policy limit. In the future, with the policy loosening, more research materials will be available. [^Back]

    [2]. ② For the evaluation methods on the senior managers of central SOEs, refer to Interim Measures for Assessment of the Operational Performance of Persons in Charge of Central Enterprises(2003, 2006, 2009, 2012). For the evaluation methods on the senior managers of local SOEs, refer to the evaluation documents on the websites of SASACs of various provinces, such as the interim measures on the evaluation of tenure contract objectives on the SOE senior managers of Xuhui District of Shanghai, the measures on the operational performance evaluation on the senior managers of the enterprises financed by SASAC of Hubei Province, the interim measures on the operational performance evaluation on the SOE senior managers of Sichuan Province. [^Back]

    [3]. ③ Regardless of the continuous appeal of cancelling the administrative rankings of senior managers of SOEs, they are still assigned to a certain administrative rankings, which can be seen from the announcements on the assignment of SOE senior managers from various levels of government organization departments and SASACs. [^Back]

    [4]. ④ Before 2003, the main regulation responsibility on these activities of central SOEs including asset management, investment management, Party construction, technology transformation, project approval, personnel assignment was scattered among several departments such as SASACs, Ministry of Finance, The Working Committee of Large Central SOEs, State Economic and Trade Committee, National Development and Reform Commission, The Organization Department of the CPC Central Committee and several other related ministries and bureaus. [^Back]

    [5]. ⑤ According to the Interim Measures for Assessment of the Operational Performance of Persons in Charge of Central Enterprises issued by SASAC in 2006, the third sub-item of Chapter 1 Item 5 on the principles that the operational performance evaluation on the enterprise managers should follow states that according to the unified requirement of responsibility, rights and benefit, it sets up an evaluation measure combining operational performance with incentive and constraint for enterprise managers, that is, payment depends on performance. Meanwhile, it considers performance as an important requirement for appointments and removals. [^Back]

    [6]. ⑥ Since 2003, the Chinese listed companies have started to publicize information on controlled shareholders. Since 2004, according to Standards for the Contents and Formats of Information Disclosure of Companies Publicly Issuing Securities No. 2 issued by China Securities Regulatory Commission, the Chinese listed companies have started to disclose the real controllers. [^Back]

    [7]. ⑦ In our sample, the ROAs of SOEs of central, provincial and city and county levels in sequence are as follows. The average ROA for SOEs at city and county levels is 0.012, for provincial SOEs is 0.0289, and for central SOEs is 0.026. [^Back]

    [8]. ⑧ Since its foundation in 2003, SASAC has promulgated a series of laws and rules to normalize the evaluation and assessment on senior managers of SOEs, including Interim Measures for Assessment of the Operational Performance of Persons in Charge of Central Enterprises (2003, 2006, 2009, 2012), the interim measures on the comprehensive performance evaluation and management on central SOEs (2006), the complementary provisions on the annual operational performance evaluation on the senior managers of central SOEs (2008), and the guidelines on further strengthening the performance evaluation on the entire personnel of central SOEs (SASAC [2009] No. 300). [^Back]

    [9]. ⑨ The experiences of SOE senior managers working in public business units are beneficial for them to set up political connections as Chinese public business units have a strong political color. For example, Chinese Academy of Science is a business unit directly affiliated to the State Council. [^Back]

    [10]. ⑩ The origins of senior managers refer to the places they come from before they take offices, which are categorized as five types, including enterprises at higher levels, enterprises at the same level (including internal promotion), enterprises at lower levels, government departments and out-of-system units (private or other non-profitable organizations). [^Back]


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This Article


CN: 11-1235/F

Vol , No. 10, Pages 117-131+187-188

October 2015


Article Outline


  • 1 Introduction
  • 2 Theoretical analysis and research hypotheses
  • 3 Analysis on SOE senior managers’ promotion and demotion: institutional background and economic reality
  • 4 Research design and empirical results
  • 5 Conclusion
  • Footnote