Shandong State-owned Assets Investment Holdings Co., Ltd: Seeking Development through Reconstruction
[Source: July 12, 2016 The Enterprise Observer]
Author: Duan Xueke
In 2015, Shandong State-owned Assets Investment has become the only state-owned capital operation company in Shandong Province. There is no precedent to follow, and no standard to refer to. Therefore, Shandong State-owned Assets develops while exploring and reconstructing. While it conducts successful completion of the reconstruction tasks, it has also overcome the economic downward pressure and achieved rapid increase in operating efficiency.
As of the end of 2015, the company consolidated assets reached 42.3 billion yuan, with an increase of 17.88%. Net assets reached 18.1 billion yuan, with an increase of 20.11%. The total profit reached1.621 billion yuan, with an increase of 28.12%. The total return on assets of the company was 5.63%, up by 0.23 percentage points over the previous year. The return on net assets was 7.95%, up by 0.7 percentage points over the previous year. The cost expense margin was 7.35%, up by 1.2 percentage points over the previous year.
Focus on standard and consolidate the foundation of development
"Standard is the foundation of development and the cornerstone of success, which is not only successful experience of the company in the past 10 years, but also the long-term principle that the company must adhere to after reconstruction.", said Lu Lianxing, member of Party Committee Standing Committee and secretary of board of directors of Shandong State-owned Assets Investment.
As an important platform for the disposal of state-owned enterprises in Shandong Province, to clear the zombie enterprises have become the unshakable task of Shandong State-owned Assets Investment. In order to promote the reorganization and integration of related enterprises, leather companies, aquatic groups, silk groups, pharmaceutical groups and other provincial difficult enterprises in Shandong Province have been gradually classified into Shandong State-owned Assets Investment.
No rules, no rounds. Standardized operation is the basis for the healthy operation of enterprise. To standardize the management of difficult enterprises, it has introduced multiple systems such as the transfer of property rights, reform and restructuring, closure of bankruptcy, asset evaluation, having set up a comprehensive system with operational norms and risk control.
Shandong Silk Group Co., Ltd. was originally a "department-level" enterprise and is the big export and tax enterprise in Shandong. But with the market changes, business gradually becomes difficult. At the end of June 2003, Shandong Silk Group had an asset-liability ratio of 154%. The accumulated owed wages, living expenses and old-age insurance and other social insurance costs reached nearly 300 million yuan.
Through the active bankruptcy reorganization and staff diversion, Shandong Silk Group has achieved "transformation." The company's original 100 enterprises have been reduced to the current 16; the number of registered staff of state-owned enterprises has reduced to the current 169 people, less than the original 1%. Last year, the company also realized a profit of 1.26 million yuan, thus completing the deficit target one year ahead. The silk culture and creativity, characteristic agriculture, landscape engineering and other new industries have a good momentum.
According to statistics, since 2005, Shandong State-owned Assets Investment has had the cumulative cleaning of 179 all types of enterprises and placed 29,000 workers. In 2015, the company's wholly-owned enterprises have achieved full profit, with net profit of 1.269 billion yuan.
"To improve the system is the first step in the norm." Lu Lianxing said that as of March 31, 2016, the company has issued 127 management systems, thus playing a solid safeguarding role in creating a standardized state-owned enterprise. At the same time, it has also established Rules and Regulations Management Approach, which is the enterprise’s internal "legislation" law, thus standardizing the whole process of the system drafting, revision, review, abolish and protecting the quality of system construction.
Information disclosure and open operation are the necessary means to build sunshine state-owned enterprises. The bidding process of Shandong State-owned Assets Investment is open to the public to ensure that the tender is open, fair and just. Lu Lianxing pointed out that the company regularly opened the factory’s affairs and trained staff to take the initiative to participate in the management of the company's awareness and enthusiasm so as to strengthen democratic supervision. At the same time, in accordance with the requirements of the provincial ASAC, the financial final accounts and other information were shown to the public on a regular basis and accepted the supervision of all sectors of society.
"The company attaches great importance to internal audit work and has set up the audit mechanism of one audit in one quarter for the headquarters, one audit in one year for tightly ownership enterprise, one round review in three years for the holding equity enterprises, to ensure that the audit is without dead ends and realizes full coverage." Lu Lianxing introduced that through the review and evaluation of the appropriateness and effectiveness of the company's business activities, internal control and risk management, it aims to promote the company’s standardized management, legitimate business, enhance the management level and core competitiveness, and promote better and faster development of the enterprise.
Norms are not only reflected in the system completion and procedure standardization. More importantly, it is the substantial standard, meaning the standard of the specific content, the details and the implementation, meaning substantial content is more important than formal principle.
The establishment of a standardized state-owned enterprise is a gradual process from legislation and curing to guiding and strengthening. Through the leadership emphasis, meeting deployment, special party class education of the past few years, the majority of employees have set a strong sense of norms; the system is externalized as the shape and the concept is internalized in mind. Only to establish a normative concept can it fundamentally solve the problem of specification.
Management innovation, cultivation and development of new kinetic energy
"As the only state-owned capital operation company, we have no mature theory nor research results support, and no other business experience to follow, so how to operate and manage is an important issue placed in front of us." In face of this difficulty, Lu Lianxing said that there was only one way out: to explore in practice and to innovate in operation. Only by continuing to explore new models and new ways suitable for the development of the company can the company gain better and faster development.
"To do a good job of corporate governance, we focus on the 'right'. To put i simply, it includes the three words: 'draw' 'put' 'grant'". Lu Lianxing stressed that the establishment of modern corporate governance structure was the primary issue of reconstruction of Shandong State-owned Assets.
After Shandong State-owned Assets was turned to a state-owned capital operation company, the company's decision-making body has been changed from the past party committee and the manager board to the new shareholders, board of directors, board of supervisors. The most intuitive performance is the decision-making process elongation. "Now, the important things need to be emphasized for three times", said Li Guangqing, chairman of the party committee and chairman of Shandong State-owned Assets. The adaptation process after the company's transformation is not a day's work, and it is looking for new mechanisms to meet the development.
To draw a clear line of right, decentralize the rights in place and conduct the full authorization is the reform approach of Shandong State-owned Assets since the reconstruction. The company has sorted out the boundary of the decision-making of each governance institution. The shareholders will delegate some of the functions and powers to the board of directors through the Articles of Association. The board of directors will exercise the authority to the president. Therefore, well-established corporate governance mechanism has been thus formed.
In 2016, Shandong State-owned Assets newly recruited 14 staff; the manager board was responsible for it in the whole process; party members and executive directors did not participate in the recruitment of relevant links. That party committee members and directors do not interfere in recruitment is one of the major breakthrough in the personnel mechanism of Shandong State-owned Assets. The party committee conducts unified management of the cadres of the medium level and above; the manager board decides the hire, appointment and removal of staff of lower than medium level.
Since the reconstruction, the new approach for marketized appointment of the manager board is a series of procedures including brewing, recommendation, inspection, publicity that the key companies should strictly follow, which is explored by Shandong State-owned Assets. Finally, the manager board is determined and the board of directors proposes the management performance objective of the manager board and signs the hire agreement with the manager board. The company's professional manager system has taken a key step.
Management innovation is easy to say but difficult to do. Management is based on the control and focuses on reason. Innovation should also start from the "reason": straightforwardness and idea. Therefore, management innovation of Shandong State-owned Assets has made a number of useful explorations in the functional rationalization and concept innovation.
As a state-owned capital operation company, how to control the ownership of enterprises is a very important issue. How to control is a topic that Shandong State-owned Assets constantly thinks about and practices.
"To strengthen the state-owned capital supervision by focusing on capital management is the new requirements proposed by Third Plenary Session of the 18th Central Committee of CPC. The current state-owned treasury regulators at all levels are practicing and exploring the path and way of capital management, mainly to establish a three-tier structure and delegate their powers", said Lu Lianxing.
He also introduced that on this basis, combined with the past decade "management of capital" path, Shandong State-owned Assets has further enriched the development of the concept of capital management. Now many people think that the capital is to conduct decentralization and reduce management, or decrease management and improve it; the core focuses on management.
For state-owned capital operating companies, the focus of capital management is in the "capital". What should be managed is the layout of the capital rather than the entity. So capital operation should be done from the "capitalist" point of view rather than do real economy from the perspective of “industrialist”. “Macro strengthening, micro liberalness, capital perspective, operating philosophy, layout optimization and return improvement” is the idea of Shandong State-owned Assets.
"To fly a kite" is the focus of equity investment management of Shandong State-owned Assets, which has two key moves: to pull and to put. To pull is to support the development of enterprises and provide efficient value-added services; to put is to let go, to put in place, which should be done in strict accordance with the "Company Law" and "Articles of Association" operation. Fulfill the shareholders’ responsibilities, be in place but not be overdoing.
Recently, Shandong State-owned Assets has held the block strategy seminars, hired the top experts to teach and analyze, so as to help enterprises to understand the development of ideas. At the same time, it uses the resources mastered by the company headquarters to conduct project docking, revitalize enterprise assets, and provide financial support or guarantee, so as to boost enterprises to be bigger and stronger. From ever intervening in the day-to-day business to providing value-added services, Shandong State-owned Assets aims to be an open-minded enterprise.
Expand business areas and help with business development
In the business model innovation, it adheres to “extend”, continues to create the new business direction and business model and seeks new profit growth point. At present, the industry layout of Shandong State-owned Assets focuses on four major industries: information, cultural investment, health industry, investment and finance. Besides the healthy industry that is still in the initial stage, other industries already have the advantage enterprises; their profit levels are gradually being improved and the development potential is sufficient.
As the main force of science and technology innovation of, Shandong State-owned Assets, the Inspur Group has grasped the trends of IT industry big data and cloud computing, seized the historical opportunity of domestic information security market localization and optimized the business model. It has successfully changed from a hardware-based IT suppliers to the leading integrated cloud computing, large data service provider, having enhanced the competitiveness of the industry. It has signed a strategic agreement with more than 60 provinces and cities; its businesses have been expanded to 85 countries and regions around the world, greatly expanding the market space.
In 2015, the small loan companies of Shandong State-owned Assets have gained approval of the province operations. At present, it has entered the re-guarantee, venture capital, asset management, fund management, micro-credit, factoring, pawn and many other businesses, thus providing a powerful carrier for creating a multi-functional financial services platform and providing "package" integrated financial services for customers.
In order to deepen the capital market and expand the fund investment in new areas, Shandong State-owned Assets initiated the establishment of nine funds with a total size of more than 20 billion yuan, including Shandong Juying Industry Development Fund with the size of billion yuan jointly set up with China Cinda, Shandong SDIC Taikang Industrial Development Fund with the scale of 5 billion yuan jointly set up with Taikang Life etc. The fund category covers venture capital, securities, equity investment, involving state-owned enterprise reform, blue economy, cultural tourism, high technology and other fields.
At the same time, the water conservation engineering bureau purchased 51% stake of Guizhou Weide Environmental Technology Co., Ltd, thus starting the pilot of mixed ownership with private enterprises. And relying on the advantages of water conservancy construction technology, it has opened the transformation pace from a single construction enterprise to integrated environmental service provider. The health industry also expands the new layout.