Editorials

Official accountability

(China Daily)
Updated: 2010-06-28 07:58

The question of holding executives at State-owned enterprises accountable for any acts of malfeasance is once again under the spotlight with the recent appointment of a key official to a crucial post.

Chen Jiulin, the former chief executive of China Aviation Oil (Singapore) Corporation Ltd (CAO), has been appointed vice-president of State-owned construction firm CGGC International Company Ltd.

Chen had effectively engineered the $550-million loss suffered by CAO after the company indulged in largely speculative and unchecked derivatives trades six years back.

Chen was sent to prison in Singapore, becoming the first executive at a Chinese State-owned firm to be convicted abroad for financial impropriety.

Even after the high-profile case made headlines, it failed to teach top executives at State-owned firms a lesson.

In 2008, Air China, China Eastern and Citic Pacific Limited all suffered huge losses from derivatives trading. The loss to Citic Pacific due to foreign exchange related transactions alone touched nearly HK$15 billion.

Ironically, no key officials at Air China or China Eastern were penalized for wrongful conduct.

Chen's case shows just how wide the gap is between domestic and overseas financial supervision.

Even though the Statute on State-owned Assets clearly states that directors, supervisors and top executives who cause huge losses to State-owned assets must be barred from taking up any such positions in future, Chen's case seems to point in the opposite direction.

A distinct and stricter accountability standard is needed to regulate top state executives.

Whenever State-owned firms suffer losses, thorough investigations should be conducted to determine whether its executives are indeed responsible and whether they must be held accountable for the debacle.

Such a system is sorely needed in order to ensure that State-owned assets are managed properly.

(China Daily 06/28/2010 page9)