Research On The Promotion Mechanism Of Senior Executives In Local State-owned Enterprises

Over the past 40 years of reform and opening-up,China has taken on a new look China's overall national strength has increased rapidly,its international standing has been established,and its people's lives have been improving.The new leadership,with Xi Jinping at the core,has put forward the development concepts of "supply-side structural reform" and "transformation between old and new drivers of growth" to improve the quality and the efficiency.The "five-in-one strategy”has drawn an even grander blueprint for China's development.As the institutional basis of socialist public ownership,as an important force for liberating and developing social productive forces,as an important pillar for building a harmonious society and achieving common prosperity,state-owned enterprises(soes)play an important role in China's political,economic and social fields.China's 40-year reform and opening-up process is also a exploration process of reform of state-owned enterprises which go through 40-year.The reform of state-owned enterprises has experienced such stages as power delegation and profit transfer,contract system,joint-stock system reform and the establishment of modern enterprise system,state-owned economic expansion and the delay period of substantive reform of state-owned enterprises,as well as mixed ownership reform since the 18th national congress of the communist party of China.The reform of state-owned enterprises has broken the planned operation system of state-owned enterprises,introduced market mechanism,and the modern enterprise system in state-owned enterprises was established.In October 2018,the national forum on soe reform set "improving governance,strengthening incentives,highlighting main businesses and improving efficiency" as the new 16-character policy for soe reform."Improving governance" has once again become a major policy orientation for soe reform,and is at the top of the new 16-character policy.The key to the reform of state-owned enterprises is the personnel system,and the core of the personnel system lies in the management of the leading personnel of state-owned enterprisesThe market-oriented reform of”de-administration" of state-owned enterprises is accompanied by the continuous expansion of the management autonomy of the leaders of state-owned enterprises.Soe leaders are increasingly important to the operations of soes.The amplification of the power of the leaders of state-owned enterprises increases the environmental adaptability and flexibility of state-owned enterprises operations under the market conditions.At the same time,the problems of"moral hazard" and "adverse selection" of the leaders of state-owned enterprises become more prominent.Despite the continuous progress of the "de-administration"reform of state-owned enterprises,senior executives of state-owned enterprises are still in the "internal labor market".Political lock-in effect makes promotion play an important role in the utility function of senior executives of state-owned enterprises.Then the design of promotion rules and promotion incentive become important means to guide the management to reasonably use power and restrict power rent-seeking.Researching the promotion mechanism of senior executives in state-owned enterprises can help us more accurately grasp the problems of senior executives in state-owned enterprises,including the promotion status,promotion channels and the externality of promotion,etc.Furthermore,it will help us to "tailor"the problem we found,that is,to guide the management to realize the maximization of enterprise value and social benefits through more effective promotion incentive design,reduce negative externality of promotion,and put power into the "institutional cage".Compared with central soes,local soes are small in scale,widely distributed in the industry,relatively low in strategic significance,and relatively weak in monopoly.For loacl soes,the industry's market share,innovation level and financial strength are often at a disadvantage.However,local state-owned enterprises still occupy an important position in the soe system,and play an indispensable role in stimulating local economy,promoting regional employment and optimizing local finance.As an important part of the state-owned enterprise system and a major engine of regional development,local state-owned enterprises have rarely received due attention.The research on the promotion of senior executives of local state-owned enterprises is even more trivial.There are differences between central enterprises and local state-owned enterprises in the aspects of regulatory independence,constraint and incentive mechanism,enterprise operating objectives and the degree of government intervention,etc.,leading to the corresponding differentiation of senior management promotion mechanism of state-owned enterprises.Different from the relatively clear performance promotion orientation of central soes,the special political ecological environment and regulatory environment of local soes complicate the promotion of senior executives of local soes.It makes the research on the promotion of senior executives of local soes more challenging and valuable.This paper targets local state-owned enterprises.Based on the perspective of institutional change and practical perspective of transfer,the promotion status of senior executives of state-owned enterprises is preliminarily grasped.On this basis,the promotion mechanism of senior executives of local state-owned enterprises is explored from multiple perspectives to solve the problem of "How do senior executives of local state-owned enterprises get promoted".Since then,this paper expands the research on the promotion of senior executives of local state-owned enterprises,and applies the promotion of senior executives of state-owned enterprises to practical problem solving.It explores the other side of promotion research,namely"the influence of the promotion of senior executives of local state-owned enterprises".Based on the promulgation of”salary restriction order" in 2009 and 2015,this paper investigated the substitutability of salary incentive and promotion incentive,and provided intellectual support for how to motivate executives of state-owned enterprises to work hard and reduce agency costs under the background of declining salary incentive.Chapter " is the introduction part.Based on the analysis of the real background,this part puts forward the necessity of research on the promotion mechanism of senior executives of local soes.Then it introduces the significance and method of the study,the framework of the study and content of the study,and finally comments on the main innovation and shortcomings of the Paper.Chapter 2 is literature review,which includes four parts:the theory of corporate governance,the study on the political tournament of the promotion of local government officials,the study on the promotion mechanism of senior executives in state-owned enterprises,and the research summary and review.Firstly,this chapter discusses the concept system of corporate governance,representative corporate governance pattern(including China)and Chinese state-owned enterprise governance.Secondly,this chapter analyzes the theory of official political tournament,including the proposal of political tournament,the content of political tournament(meaning and characteristics,preconditions and main threats,tournament indicators,advantages and disadvantages),and the criticism of political tournament theory.Thirdly,this paper reviews the existing research on the promotion mechanism of senior executives of state-owned enterprises,and divides the existing literature into two parts:"the research on promotion factors of senior executives of soes" and "the influence of promotion of senior executives of soes".The former part focuses on solving the problem of "How do soe executives get promoted",and the latter part focuses on analyzing the influence of the promotion of senior executives of state-owned enterprises on enterprises.Finally,in the part of summary and comment,this paper argues that the promotion of senior executives in state-owned enterprises is the extension of the promotion of officials.The weak supervision environment of state-owned enterprises in China often results in the failure of the supervision mechanism for senior executives of state-owned enterprises.Similar to the political tournament of the promotion of government officials,the "quasi-political tournament"also exists in the promotion of senior executives of state-owned enterprises.The existing research on promotion of senior executives of state-owned enterprises is less focused on senior executives of local state-owned enterprises,more focuses on static mechanism research and the explicit promotion factors.The research between government officials and promotion of soe executives are numbered,and to research promotion of soe executives with cultural perspective is less.In terms of research paradigm,the interaction between different promotion factors is rarely investigated.Based on this,the research value,research focus and innovation points of this paper are clarified.Chapter 3 is the part of the historical change of the management system of the leading personnel in state-owned enterprises and the status of position changes.It is committed to clarify the evolution of the management system of state-owned enterprise leaders and the reality of transfer.Then,it helps us preliminarily grasps the promotion status of local state-owned enterprise executives,paving the way for the research of the following chapters.This chapter briefly discusses the reform process of the management system of the leading personnel of state-owned enterprises after the founding of new China,and divides it into five stages:before the reform and opening up,the exploration after the reform and opening up,the reform of joint-stock system and the establishment of modern enterprise system,the establ ishment of the State-owned Assets Supervision and Administration Commission,and the post-18th national congress of the communist party of China.In addition,this chapter depicts the promotion facts of senior executives of state-owned enterprises from 2009 to 2017,and analyzes from the perspective of promotion direction,year of transfer,industry distribution and other statistical characteristicsChapter 4 to chapter 6 focuses on solving the problem of "how to promote of senior executives of local soes".Chapter 4 focuses on the lack of existing research on the behavior of local government officials and senior executives of local soes as well as the defects of static research on promotion mechanism.It explores how the pressure on the performance of local officials affects the promotion mechanism of senior executives of local state-owned enterprises from the dynamic perspective.From the cultural perspective,Chapter 5 initiatively applies the cultural concept of "locals" to the research on the promotion mechanism of senior executives of local soes.Chapter 6 breaks the limitation of the existing researches that focus on explicit promotion factors,and takes "hometown relationship" as the proxy variable of the unobservable personal relationship between senior executives of soes and government officials to study the influence of "hometown relationship" on the promotion of senior executives of local soses.Chapter 7 focuses on the other side of the research on executive promotion mechanism:"the influence of the promotion of senior executives of local soes",focusing on solving the problem of executive incentive under the background of insufficient salary incentive of executive.Another significance of chapter 7 is to test the important premise of the research on the promotion mechanism of senior executives of local state-owned enterprises in chapters 4 to 6,that is,promotion incentive is more important than salary incentive.Chapter 4 first proposed the concept of "quasi-political tournament",and applies the political tournament of government officials to the study of the "quasi-political tournament" of senior executives of local state-owned enterprises.Based on the perspective of pressure on local officials' performance,it explores the dynamic promotion mechanism of senior executives of local state-owned enterprises.The findings are as follows:with the increasing pressure on the performance of local officials,the influence of political resources on the promotion prospects of senior executives of local state-owned enterprises shows a "positive U" pattern,and enterprises' bearing the policy burden will continue to improve the prospects of soe executives' promotion.The influence of enterprise performance on the promotion of senior executives in state-owned enterprises has threshold effect.When the corporate performance is higher than the threshold value,the performance pressure of local official will produce negative or insignificant influence of corporate performance on the promotion of senior executives.When the corporate performance is below the threshold,the impact of the corporate performance on the promotion prospects of senior executives continues to increase with the increasing pressure on the performance of local officials.On the one hand,the participation of local governments in political tournaments and the pressure of political performance will help to break the path of relationship promotion of senior executives of local state-owned enterprises,reduce the rent-seeking behavior of officials,and guide senior executives of local state-owned enterprises to focus on business operation,so as to optimize the promotion mechanism.On the other hand,excessive political pressure triggers local officials extend a "predatory hand" to soes,and even realize personal promotion at the expense of corporate development interests.For the sake of promotion interests,senior executives of local soes tend to have political pandering behaviors.At this point,both official promotion and executive promotion have negative externalities on the development of soes.Chapter 5 is about local and local executive promotion.This chapter studies whether locals have promotion advantages when they serve as senior executives of state-owned enterprises,and further implementation mechanism analysis.The findings are as follows:compared with outsiders,local people have more promotion advantages when serving as senior executives of state-owned enterprises;From the perspective of regional heterogeneity,the promotion advantages of local executives are more obvious in the eastern and central regions.Compared to state-owned enterprises with non-local executives,state-owned enterprises with local executives have better performance and bear more policy burden.Under the influence of"performance noise",local executives are more likely to be promoted by performance than non-local executives under the same performance condition;Local executives are more likely to be promoted by bearing the policy burden than non-local executives.On the one hand,state-owned enterprises with local executives have better corporate performance,which means that local executives are of positive significance to the operation of state-owned enterprises.On the other hand,state-owned enterprises with local executives often bear more of the policy burden.This also means that local soe executives,while better managing the enterprises,will also cater to the needs of the superior government by assuming governmental functions,which to some extent hinders the development of soes.Chapter 6 discusses the connection between the hometown relationship and the promotion of senior executives in local state-owned enterprises.As one of the important geographical relations,the relationship between townsmen has been widely mentioned in our traditional culture.This chapter explores whether the relationship between local government officials(provincial governors and party secretaries)and local soe executives is conducive to the promotion of local soe executives.The results show that the relationship between local soe executives and government officials is conducive to their promotion.Compared with the situation where the performance of the senior executives in the state-owned enterprises is better,the facilitation effect of the hometown relationship to the promotion of senior executives is more reflected in the situation where the performance of the senior executives is worse.Compared with municipal and county state-owned enterprises,the hometown relationship between local state-owned enterprise executives and provincial governors and party secretaries plays a more significant role in facilitating the promotion of local state-owned enterprise executives in provincial state-owned enterprises.The influence of the hometown relationship to executives promotion depends on the threshold effect of performance.The performance threshold effect reminds regulators to pay special attention to the poor performance of state-owned enterprises,find out whether the promotion of senior executives with "hometown relationship" involves the protection of government officials and rent-seeking behavior.In addition,the facilitation effect of hometown relationship on the promotion of senior executives in state-owned enterprises mainly exists when senior executives work in state-owned enterprises under the direct jurisdiction of officials from the same township,which weakens the influence scope of hometown relationship and reduces the distortion and damage of hometown relationship to the promotion mechanism of senior executives in state-owned enterprises.Chapter 7 explores whether promotion incentive can be an effective alternative to salary incentive,which based on the problem of insufficient salary incentives for senior executives of state-owned enterprises under the implementation of twice"salary restriction orders".The results show that,on the whole,promotion incentive can be an effective alternative to salary incentive,but incentive substitution is heterogeneous.Specifically,as an alternative motivation,political promotion motivation has stronger substitutability than non-political promotion motivation.Compared with CEO,the substitution of promotion incentive to salary incentive is more obvious to chairman.Compared with the eastern region,the substitution of promotion incentive to salary incentive is more obvious in the central and western regions.Compared with city and county state-owned enterprises,the substitution of promotion incentive to salary incentive is more obvious in provincial state-owned enterprises.Compared with the executives who do not serve in the shareholder unit,the substitution of the promotion incentive to the salary incentive is more effective for the executives who serve in the shareholder unit.Further discussion shows that the effect of incentive substitution is obvious for the senior executives of state-owned enterprises with higher salary,while limited for the senior executives of state-owned enterprises with lower salary.Compared with the salary before the transfer,the increase(decrease)of the salary after the transfer will magnify(weaken)the substitution effect of promotion incentive on the salary incentive.Under the background of "salary restriction order",the promotion incentive design cannot be one-size-fits-all.In the situation where incentive substitution is relatively obvious,the superior department can strengthen the promotion incentive of senior executives in state-owned enterprises.In the case of poor incentive substitution,the superior department should not only rely on promotion incentive,but also look for other alternative incentives.Chapter 8 is the research conclusion,policy suggestion and research prospect.This chapter discusses the conclusions and revelations of the research,finds out the policy implications and points out the research ideas in the future.The innovation of this paper is mainly reflected in the following three aspects.Firstly,the promotion mechanism of senior executives in soes is innovatively summarized as "quasi-political tournament",so as to realize the innovation of research perspective and expand the research scope of existing promotion factors.Based on the grasp of the promotion system and promotion reality of senior executives in soes,this paper expands the existing theory of official political tournament,and innovatively generalizes the promotion mechanism of senior executives in soes as "quasi-political tournament".This paper introduce government officials into the study on the promotion of senior executives of soes,and expand the scope of the existing study on promotion factors at the level of external environment.For the first time,the regional concept of "locals" was applied to the research on the promotion mechanism of senior executives in soes.This paper breaks the existing research framework of explicit promotion factors and brings the implicit promotion factor of "hometown relationship" into the research of senior executives promotion of soes.Secondly,in terms of research methods,the paper breaks the paradigm of separate research on promotion factors,and emphasizes the research on the cross-influence between promotion factors and their joint effect on the promotion of senior executives.The traditional research paradigm unilaterally seeks the influence of various promotion factors on the promotion of senior executives in soes,rarely considers the interaction of promotion factors and gives the regression results to economic meanings without considering the interaction of promotion factors.As a result,the inner link between promotion factors and its overall influence on the promotion of senior executives cannot be found.This paper breaks the research status of separate research on promotion factors and emphasizes the research on the cross-influence and co-action of promotion factors on the promotion of senior executives,so as to have a clearer grasp of the influence mechanism of promotion factors.Thirdly,real promotion data are used to investigate the substitution of promotion incentive and salary incentive,and the research dilemma is broken through the effective solution of endogenous problems,and heterogeneity analysis is carried out on incentive substitution effects in different situations.Different from the existing studies that measure the promotion incentive intensity by constructing the promotion expectation,this paper uses the real promotion data of senior executives of soes to conduct the incentive substitution research,and the conclusion is more accurate and reliable.Due to the endogenous problems of executive salary and promotion,the previous studies were unable to integrate them into the same analytical framework.This paper effectively solved the endogenous problems,so as to realize the research under the same framework.In this paper,sufficient heterogeneity research and mechanism analysis were carried out,and further extended discussions were carried out.The research conclusions were more comprehensive and the mechanism was more clear,which enriched the theoretical achievements and practical experience of soe governance.