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SCMP Reporter

Senior staff at some loss-making state-owned enterprises in Guangdong are bleeding the firms dry, a research centre claims

Senior managers of some state-owned enterprises in Guangdong are bleeding their organisations of funds by paying themselves unreasonably high salaries and awarding arbitrary bonuses, a local research centre has claimed.

In a wide-ranging report released  by the government-backed Guangdong Provincial Conditions Survey and Research Centre, it was also claimed the managers were using dubious methods to divide up their companies'  profits.

Jiang Leyi, secretary-general of the provincial Communist Party Discipline Inspection Commission, authored one of the report's sections and lashed out at some leaders of state-owned enterprises (SOEs) for giving themselves high salaries based on inflated assessments of their contributions,  China Business News reported.

Ms Jiang told the newspaper that some senior  staff had earned up to 100 million yuan over several years even though the organisations were running at a loss.

'Some state-owned enterprises arbitrarily distribute the profits in the name of bonuses and divvy up the SOE property,' she said.

The report was also quoted as saying 'the existing salary management system in Guangdong lacks standards and effective restraints, and is out of control overall'.

It said many SOEs in the province had no salary management rules and wages were rising at a much greater rate than profits  at some enterprises.

According to the Guangdong State-owned Assets Supervision and Administration Commission, the average labour costs at Guangdong's 21 SOEs rose by 11 per cent in the first half of last year while profits had dropped by an average 6.5 per cent.

'The annual salaries of workers at state-owned enterprises were higher than in the rest of the market. For example, an ordinary driver in some government operations can get as much as 100,000 yuan a year,' the newspaper quoted the report as saying.

Beijing Institute of Technology economist Hu Xingdou said the loose oversight of salaries was a serious issue and had become a key source of SOE losses, especially in monopoly industries such as electricity, oil, tobacco, telecommunications and water supply.

Professor Hu said SOEs had excessive power to distribute their own profits and that this  process was largely unsupervised.

He said SOEs established before 1984 could decide how to distribute their profits themselves after submitting evidence of their revenue. There was little oversight of how profits were carved up because many of the companies had no board of directors, or  boards that existed only in name.

Professor Hu said the government should set tighter rules and standards for the SOE salary system and beef up inspections and audits.

Guangdong Academy of Social Sciences  economist Cheng Jiansan said the best way to address the situation was to privatise some of the operations and list other entities that could not be sold off on the share market to open the organisations to public scrutiny.

The National People's Congress Standing Committee is considering introducing legislation under the country's Property Law to make it a punishable offence to sell off state assets at  low prices or deliberately induce losses in an SOE.



Managers' inflated salaries come under fire