Economy

Shuttle-board

How the Party manages its business executives

Su Shulin: taking a pay cut

A red telephone sits conspicuously on the desks of the 50 or so bosses that run China’s biggest state-owned firms – one of the revelations in Richard McGregor’s book The Party. “When it rings you’d better make sure you answer it”, a corporate apparatchik tells the author, because the person on the other end is likely to be a senior politician. McGregor says those with the special phones are members of “a tight-knit club that runs the country, a small group of about 300 people, mainly men, with responsibility for about one-fifth of humanity.”

The red telephone is a good symbol of the ties between China’s ruling party and the executives who manage most of the country’s dominant companies. And it is a nexus that has seen a number of executives get reassigned to senior Party jobs in recent weeks.

Take Su Shulin. The 49 year-old just left oil major Sinopec, trading his Rmb1 million salary for the post of deputy Party chief of Fujian. Su’s average day used to consist of balance sheets and board meetings. Now he switches those for a political role in a province that has an added significance thanks its proximity to Taiwan.

As Southern Weekly points out, this isn’t the first time Su has crossed between business and politics. His career began at China’s biggest oil company CNPC, where he eventually became a deputy general manager. Then, in 2006, he was transferred to Liaoning to become secretary to the Party’s organisation department. (More unusually, he was then moved back into the business arena to run Sinopec after its erstwhile boss Chen Tonghai was jailed for corruption.)

Is all this shared experience useful? Guo Weiqing, a professor of political science at Sun Yat-sen university, thinks so. He reckons senior corporate execs bring valuable experience to government. “They are very familiar with the market economy and senior managers of state-owned companies usually have international vision and modern management ideas,” says Guo.

It is certainly a tried-and-tested trend. In the late nineties Wang Qishan was head of China Construction Bank. Today he is a vice-premier and one of the most senior figures in the government. And China Daily points to other examples: Li Xiaopeng left Huaneng (a power firm) to become deputy governor of Shanxi province. Miao Wei departed Dongfeng Motor to become Party chief of Wuhan. And Wei Liucheng was ‘promoted’ from CNOOC boss to become Hainan’s governor.

Is the trend accelerating? Just after Su’s announcement, Wang Zhigang was named deputy Party secretary of the Ministry of Science and Technology. Previously he ran China Electronics Technology Group.

Local media say the Party’s preferred practice is to shuffle its technocrats between political and commercial roles (a Sasac executive estimated for Southern Weekly that 95% of Chengdu’s state firm execs had also served as local bureaucrats, for instance). The Party, after all, is steward of both the business and political spheres.

But is it good for the companies concerned? That is a tougher question, especially for the state firms which are listed abroad. Foreign stockholders like to see management stability and succession planning (you could call it the GE model). The Party’s approach to personnel planning seems arbitrary and unpredictable by comparison.

Equally, investors question the way the state likes to rotate executives not only into political jobs, but also between rival firms in the same industries.

Su’s replacement at Sinopec was Fu Chengyu, who had run CNOOC for almost the entire decade since its IPO in 2001. Sinopec shareholders will doubtless be happy to have such a competent and highly regarded oilman at the helm. But for shareholders of CNOOC the reshuffle raises questions. Inevitably, it means proprietary information has just walked out of the company HQ and into that of a major competitor.

Nor is this a first: in 2004, the CEOs of the three major telcos were all rotated, for instance, with each one joining an erstwhile rival.

Lawyers specialising in non-compete clauses can evidently expect very few billable hours from the Party…


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