The Research Of The Effectiveness Of Party Organization Participates In The Corporate Governance In China’s State-owned Companies

The central and local governments in most of countries in the world today are mastered by the political parties and use its ruling position to impact political, economic and social aspects. Parties play an important role in the modern social and political life. Party system in China is different from the competitive party system in western countries; it is the combination of Marxism political party theory with China’s actual conditions and it is unique. State-owned enterprises are the backbone of our national economy, the reform and development of state-owned enterprises are related to the country’s economic security and the development and perfection of Chinese characteristics socialist system. Currently, with the establishment of modern enterprise system, the development of state-owned enterprises and the political advantage of party organization are faced with great challenges. When establishing modern enterprise system, we must fully consider our country’s political, economic, social basic system, and let the party play political role fully is the major features and the unique advantages of state-owned enterprises in our country, it is also a distinctive feature and the essential requirements of modern enterprise system with Chinese characteristics.2009national state-owned enterprise party construction work conference stressed that since the founding of new China, especially since the reform and opening up30years ago, the state-owned enterprise development process shows that the party construction work has always been the unique political resources of state-owned enterprises, is an organic part of enterprise core competitiveness, and the key factor to realize scientific development. It is also an essential feature of establishing a modern enterprise system with Chinese characteristics. Therefore, on the basis of fully using the experience of international corporate governance, the study of party organization’s effectiveness in modern corporate governance in the new period has important theoretical value and practical significance in enriching the characteristics of the practice and theoretical of socialism with Chinese characteristics. Comparing with the typical corporate governance models of foreign countries, the corporate governance structure of China’s state-owned companies has a very important characteristic:party organization participated in corporate governance. Especially through the provisions of the Constitution, the Company Law and the Constitution of the Chinese Communist Party, the Communist Party Committees of China in state-owned enterprises are entitled the qualification in the corporate governance. This is the most prominent character in the corporate governance of our country, at the same time, it is also make the relationship between the main frame of the structure of modern corporate governance and the traditional enterprise system more complicated. At the same time, because there are problems such as insider control, lack of external governance mechanism in state-owned enterprise now, provides the realistic foundation for party organization to participate in corporate governance in state-owned enterprises. Facing the increasingly prominent problems of the duty of the board of directors and party committee are not clear, power and role conflict, this paper take the behavior of party committee participate in corporate governance in state-owned listed companies as the research object, separate the body of political intervention into "government" and "political party", extended the research perspectives from the government sector outside to the grass-roots party organizations in the enterprises, research the system background, related theories, participation ways and the influence on business decisions and actions of the party organizations participated in corporate governance in state-owned enterprises, build the theory model of party organization participating in corporate governance effectiveness. By constructing a new index system of the party organization participating in corporate governance, examine the effect of the behavior of the party organization participate in corporate governance to agency problem from the insider control, executive compensation contract and labor redundancy, and how to exert governance effect and value effect finally. According to the results of empirical analysis, the main conclusions of this study are as follows:1. In the state-owned list companies in our country, the party organizations participate in corporate governance will restrict the managers’behavior, prevent agency cost from insider control problems, reduce executive compensation, and restrain executives grab excessive compensation; reduce the salary gap between executives and ordinary employees. In this paper, the results further support the previous scholars’view, that the power of the party’s personnel appointment and removal is the most important balance power to insider control in the state-owned enterprises; the party organization department will restrict the managers. Before the incentive and restraint mechanisms from the internal governance and external market work effectively, the administrative measures will not be replaced by market means, position, career, political and social objectives will still play an important role.2. The party committee participate in corporate governance will bring extra political burden, redundant employees to the enterprise. With the increase of the level of party committee participating in corporate governance, the number of employees increases, resulting labor redundancy. The result shows that except for the state-owned shareholders and government’s political intervention, there is a third type of intervention approaches:through the party organization to intervene the enterprise. The party network covering the entire social units, including state-owned enterprises in our country, and influence the business decision. This paper verifies the impact on employment behavior in state-owned enterprises.3. The governance effect of party committee is different in varying participation degrees, higher or lower participation degrees are not conductive to raising the level of corporate governance. This is because the agency cost, salary cost and political cost in state-owned enterprises will change with the degree of the party’s "two-way access", and has an inverted "U-shaped" relationship with the level of corporate governance, but has a negative impact on corporate value.This study based on the largest corporate governance characteristics in China’s state-owned enterprises, which is party committee participating in corporate governance. The innovation is to break the study of political intervention, examining the effect of party committee participating in corporate governance to corporate actions and results from the perspective of internal party organization. The research results show that in addition to government departments and state-owned shareholders, the grass-roots party organizations are also another main political intervention, through the internal party organization, the enterprises can still be intervened. The research provides a new perspective for political intervention, enriched the research achievements in the field and the Chinese characteristics corporate governance theory.