Date
20 August 2017
A state-owned company holding a board meeting. Many listed firms hire retired officials to leverage on their political connections. Photo: caky.com.cn
A state-owned company holding a board meeting. Many listed firms hire retired officials to leverage on their political connections. Photo: caky.com.cn

Retired officials bypass rules to join listed companies

Some retired government officials continue to take non-executive roles in listed companies using different ways to get around the regulation, Xinhua News Agency reported on Monday.

Retired officials in China are not allowed to be employed by a company in the same field as their former government position within three years after retirement, according to a circular issued by the Organization Department of the Communist Party’s Central Committee in October last year. They are required to get approval from their former government units for such a role three years after retirement.

However, some officials have figured out different ways to get around the rules. Some would initially take up some management role in a related industry body or association, then they would assume the non-executive director position in a listed firm in the industry.

A vice governor in a western province has opted to become a scholar first before becoming a non-executive director at Sichuan Chuantou Energy (600674.CN).

Others use excuses to justify their roles in listed firms. For example, Zhejiang Chint Electrics (601877.CN) and Ningxia Younglight Chemicals (000635.CN) have said in filings that they don’t have enough non-executive directors or the terms of incumbent directors have not expired yet.

These officials are not allowed to get any salary, allowance or bonus from companies they serve as non-executive directors, according to the Organization Department regulation.

In reality, however, these directors receive salaries ranging from several tens of thousands to over 100,000 yuan. In 2013 alone, non-executive directors from more than 1,000 listed firms have obtained a combined payment of 480 million yuan (US$77.35 million).

In addition to handsome salaries, these non-executive directors also get various perks including allowances and use of company cars, the report said, quoting a source from a listed firm in Beijing.

Many listed companies hiring retired officials as non-executive directors intend to leverage on the connections these officials have built over the course of their political careers.

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JZ/JP/CG

Freelance journalist

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