Incentive to promote innovation among SOEs

Updated: 2011-07-30 16:23


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BEIJING -- China will promote a dividend-incentive mechanism on a trial basis among centrally-administered state-owned enterprises (SOEs) to retain talents and bolster business innovation, the Shanghai Securities News said Saturday.

To implement share-and-dividend-rights incentives is of great significance to promote technical innovation and commercialization of research findings among central SOEs, especially the high-tech firms and research institutes, the report cited Shao Ning, deputy head of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC).

"We should further push forward and expand the trial run of the dividend-rights incentive mechanism to more central SOEs," Shao said.

According to the SASAC, the mechanism will enable technicians and managers who make great contributions and perform exceptionally to receive certain rewards in line with the enterprises' profits.

The SASAC approved the pilot run plans submitted by two central SOEs out of 13 that were on the list of the trial run program created in October last year, said the report.

But the disputed incentive mechanism of share ownership was not included in the pilot program as opinions on the pricing and distribution of unlisted firms' shares varied, the report said.

"Because the effects of previous trials of the share-rights incentive mechanism were controversial, we then started considering the dividend incentive," Shao said.

According to Shao, the dividend-rights incentive mechanism, which is a de facto benefit sharing system, closely links rewards with position and incremental economic growth and can best combine the interests of both incentive targets and shareholders and optimize the distribution structure.

"When conditions mature, we will work to apply the incentive mechanism of share ownership to firms that are suitable," Shao said.