More SOEs inducting independent directors

By Wan Zhihong (China Daily)
Updated: 2006-12-08 06:44

Major State-owned enterprises (SOEs) will continue to rope in outside directors to raise the level of corporate governance, a top official said yesterday as more companies seek to restructure and list on the stock market.

"We have appointed 65 independent directors to 19 SOEs so far, and we hope to raise the figure substantially to improve management transparency and efficiency," said Shao Ning, vice-chairman of State-owned Assets Supervision and Administration Commission (SASAC).

The latest to do so is China Metallurgical Group Corp (MCC) the nation's leading construction company which took on board five independent directors yesterday as a prelude to its listing plans.

The structure and operation of the SOE's board of directors follow the model of State-owned Temasek Holdings of Singapore, an MCC spokesman said.

In companies controlled by Temasek, the board of directors generally comprises civil servants and private entrepreneurs.

"The move (to induct more outside directors) reflects China's on-going effort to improve the performance of major SOEs," said Hong Liang, an analyst with China Galaxy Securities.

Major conglomerates such as Shenhua and Baosteel were among the first group of seven SOEs to invite outside directors as part of a board restructuring last year.

The reconstituted boards are authorized to select managers, assess management's performance, determine managers' compensation packages, and decide on major investments as well as raising capital.

This year, SASAC increased the number of enterprises for board restructuring to 19.

At the end of 2005, SOEs under SASAC had assets of 10.6 trillion yuan (US$1.34 trillion).

(China Daily 12/08/2006 page1)

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