It appears the Chinese management merry-go-round is turning once again. Sinopec Chairman Chen Tonghai has resigned, citing “personal reasons,” which may or may not transpire to be “serious breaches of discipline.”
Meanwhile, China Banking Regulatory Commission employees Tang Shuangning and Xu Feng are to become chairman of China Everbright Group and president of Shanghai Pudong Development Bank respectively. Xiang Junbo, a deputy governor at the People’s Bank of China, is taking over as president of the Agricultural Bank of China.
No underhanded behavior tied to these last three personnel changes – they’re being made, well, because the government feels like it.
I wrote an article recently (for the upcoming July issue of CER) about the role of non-executive independent directors on the boards of listed Chinese companies. The appointment of senior executives cropped up because it is one area where – at state-owned enterprises, at least – independent directors can’t expect to have much of a say. On issues like this, the Communist Party delegates on the board rule the roost.
It makes for interesting situations in terms of governance.
First of all, it doesn’t do wonders for corporate transparency and serves as a reminder that, particularly in sensitive industries, policy is set by Beijing. One would like to think that an increasingly business-minded Beijing’s thinking is increasingly in tune with Western corporate philosophy, but there are no guarantees.
Secondly, who comes in as the replacement? The guy taking over from Chen at Sinopec is Su Shulin, a former vice-president at key rival PetroChina, which naturally leads to questions about strategy and relations within the top echelon of management.
People I spoke to for the article gave a range of responses. One foreign independent director on the boards of a number of Chinese firms argued that the state, as major shareholder, was entitled to have the main say on appointments. And this merry-go-round isn’t necessarily a bad thing at Chinese firms …
“Companies can become bureaucratic and stale over time. A change-around in leadership is not without its merits. You might come to one answer because it is the standard approach but look deeper and there might be some rationale there. You have to look at it on a case-by-case basis.”
A foreign banker, responsible for overseeing his employer’s investments in China, was more concerned about the unpredictability factor. He also had a horror story to tell:
“They [another foreign bank] heard rumblings that the chairman of the Chinese bank they had invested in was not getting full support and so flew to Beijing to speak to the bank and the regulators, saying ‘This is our guy’. They were given reassurances but then the chairman was sacked while they were on the plane going home.
“Senior management positions are not a real board issue in China.”