Shandong State-owned Assets: How to Conduct Equity Management through “Capital Management”
[Source November 26, 2015 China Economic Times]
As the main state-owned capital operation company in Shandong Province, Shandong State-owned Assets plays an important role; at the same time, it has achieved good economic returns.
According to statistics, as of early September this year, the assets of Shandong State-owned Assets totaled 37.994 billion yuan, with an increase of 18.1%. Interests of owners totaled 15.811 billion yuan, with an increase of 15.75%. The cumulative operating income reached 12.872 billion yuan, with an increase of 6.87%. The total profit reached 1.181 billion yuan, doubled that in the same period last year.
At present, Shandong State-owned Assets has been approved as the pilot unit of the first batch of state-owned capital operation company in Shandong Province. It is the only one state-owned capital operation company; the reform program has been approved. Io accordance with the steps, it is promoting the work.
What did the company take in the process of reform? What has been gained in equity management in recent years? What is the future long-term planning? Recently, the reporter of China Economic Times entered the Shandong State-owned Assets. The company chairman Li Guangqing introduced this.
It has been reconstructed to an investment operation company of state-owned assets
Li Guangqing told this reporter that in recent years, Shandong State-owned Assets has insisted on doing business and maintained a good momentum of development.
Since this year, among the newly reconstructed or newly established 11 state-owned capital investment operations companies that Shandong Province approved, Shandong State-owned Assets is the only state-owned capital operation company. At present, in key reform issues and areas, Shandong State-owned Assets bravely explores and boldly forward.
After being converted into a state-owned capital operation company, in which areas will Shandong State-owned Assets be further improved? Li Guangqing said that first of all, after the transformation of state-owned capital operation company, the corporate governance structure has been perfected to the party committee, board of directors, board of supervisors and managers, which further rationalizes the relationship between corporate governance and improves corporate governance efficiency.
Second, the company has actively promoted the establishment of a modern enterprise system. At present, the corporate reform plan of four enterprises owned by the whole people has been approved; other tenure companies are also further improving the process of corporate governance structure.
Third, the company is vigorously promoting the professional manager system. And constantly improve the incentive and restraint mechanisms; continue to carry out senior management contractual work. At present, the equity incentive plan of the two listed companies: Inspur Information and Inspur Software subordinate to Inspur Group have also entered into the implementation stage. The holding company Reassurance Group initially developed the equity incentive plan, which is being promoted according to the stipulated procedures of National Equities Exchange and Quotations.
Fourth, the company further establishes and improves the modern financial and auditing system. According to the standards of listed companies, the company publishes the annual corporate social responsibility report, the annual financial budget report, the annual and quarterly major information bulletins on the company's website on a regular basis, intensifies the audit supervision, establishes the normalized audit mechanism and actively builds the "a transparent state-owned enterprise".
Finally, Shandong State-owned Assets adheres to the rule of law and strict management of the enterprise, goes all out to do a good job in building a clean government and establishes a good image of state-owned enterprise.
Promote equity management and improve the enterprise profitability
"One of the key responsibilities of state-owned capital operating companies is equity management, which boosts the value of equity by raising the profitability of the investing enterprises," said Li Guangqing.
In 2005, at the beginning of the establishment of Shandong State-owned Assets, Shandong Province ASAC has gradually transferred the equities of more than 10 provincial enterprises. Later, Shandong State-owned Assets has formed some shares through the acquisition or new formation. As of now, there are a total of 46 enterprises. These shares involve multiple industry types and single scale, which do not have high correlations among each other. So its management is complex and it is difficult to take the single management idea and practice.
Li Guangqing said: "After years of exploration, Shandong State-owned Assets has broekn through the traditional management and has formed a set of capital-based equity management ideas and practices.
First of all, in terms of concept, the company advocates equal business and positions itself as a shareholder rather than a higher department. It respects the equal management idea among the legal businesses, respect the corporate property rights and business autonomy.
Second, in the course of daily business, it adheres to the principle of "doing something and not doing." It does not interfere with the daily management of the enterprise and make the enterprise operate their own. Of course, the company leadership is not merely waiting for the company dividends, but acts as a positive shareholder, and actively participates in improving corporate governance of investment enterprise and improves profitability. At the same time, according to the industrial policy, it conducts timely analysis and judgment of the industry prospects and potential risks of the investment enterprise, trace the implementation of major corporate decision-making matters, monitor the operation of enterprises so as to prevent the loss of equity value.
In addition, return to the shareholder status. "Capital management" is essentially a return of shareholder status, which means to exercise the duties of shareholders through the corporate governance system arrangements on the basis of shareholders’ responsibility, rights and obligations.
Obviously strengthen the competitiveness of the ownership enterprise
The implementation of good ideas needs to do the corresponding supporting work. Li Guangqing pointed out that in order to achieve these ideas; they had to focus on the following tasks:
First, establish a standardized modern enterprise system in the enterprise, give full play to the positive role of the "supervisor" and be concerned about the major issues concerning interests of shareholders.
Second, there is a key point in how the directors and supervisors perform the duties of the shareholders, that is, how to coordinate the relationship between "appointing personnel to perform their duties independently and manifesting the will of the investors". In order to achieve the unity of the two, we have done a lot of exploration. At present, the company asks to send directors; on the basis of full reference to the company’s suggestions, conduct self-judgement, self-decision and independent responsibility according to professional analysis. The company has also established a post-evaluation system to conduct post-evaluation of the duties assigned to the directors and supervisors. Then conduct examination and determine appointment according to the assessment results.
Third, do a good job of the enterprise’s performance evaluation and assessment. "Through the practice and exploration in recent years, the market competitiveness ability of ownership enterprise of our company has been significantly enhanced under the capital-based management model relying on corporate governance." said Li Guangqing.
The profits of enterprises like Shandong Reguarantee Group, Inspur Group, Property Equity Trading Center, Shandong Provincial Light Industry Supply&Marketing General Corp have realized large-scale increase. The losses of several difficult enterprises on the verge of bankruptcy including Shandong Silk Group, Qingdao Fishery Company have also been significantly reduced, and gradually gone out of the dilemma.
Li Guangqing also pointed out that in practice, the company's equity management would be different according to the proportion of shares, the characteristics of the industry, the governance completion degree of enterprises, business management capacity and corporate risk prevention level.
For example: the provincial Re-guarantee Group is a listed company on the National Equities Exchange and Quotations. It has 16 shareholders and the share proportion of Shandong State-owned Assets is close to 63%. Targeted at its high risk characteristics of the industry, our equity management focus is to grasp the performance evaluation and risk assessment control.
ERGO is a joint venture of China and foreign countries. Shandong State-owned Assets has 50% stake. The focus of equity management is to research the major decision-making matters such as strategy, budget, performance, pay and so on.
Inspur Group is an information technology company; Shandong State-owned Assets owns the stake of 38.88%. Equity management focuses on maintaining equity value strengthening the dividend management and trying not to manage the specific business matters.
“Reconstruction of Shandong State-owned Assets has been launched. In the next step, we will continue to do the tasks of reconstruction in accordance with the requirements of the Shandong provincial government and provincial ASAC and through combining the functional positioning of the state-owned capital operation company.” Li Guangqing said specifically. First of all, do “the 13th five-year” strategic planning of the company. At the same time, within the prescribed time, establish and improve the corporate governance structure and complete the corresponding reconstruction work. Third, accelerate the restructuring of funded enterprises, and gradually promote the mixed ownership reform. Fourth, adhere to market-oriented policy, strengthen capital investment and operational management capabilities, improve the business model of "equity investment-equity management-equity operation", speed up the transfer of state capital, exert the functions of investment orientation, structural adjustment and capital operation. Fifth, actively play the role of the company's industrial integration. Under the requirements of the unified supervision of provincial management state-owned assets, help the provincial ASAC to do the verification of related assets, reorganization and consolidation and clean-up disposal work.