BEIJING & CAMBRIDGE, Mass.--(BUSINESS WIRE)--Monitor Group and the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council of the Peoples Republic of China held a joint forum on Corporate Governance in Beijing on January 14, 2010. Mr. Rongrong Li, Chairman of SASAC, initiated the forum on Corporate Governance, following discussions between SASAC and Monitor Group on the failure of the corporate governance process to prevent a number of high profile corporate collapses in North America and Europe over the past decade.

The Chinese Government through SASAC has initiated a pilot project involving 24 of the Commission’s 129 state-owned enterprises in which some of the members of the board are outside, independent directors. The aim of the pilot program is to test the best features of different corporate governance models in order to develop a model that is appropriate for the Chinese business culture and socialist market economy. The aim of the SASAC corporate governance model with “Chinese characteristics” is to achieve better governance, improved risk management and clarity on decisions rights. While most of the independent directors are Chinese nationals from within China, a number of non-Chinese directors have also been appointed to the 24 company boards since the program began in 2004. In appointing these boards, SASAC has embarked on a process to transfer decision-making powers over corporate strategies, budgets and compensation plans from its central authority to the state-owned enterprises. Achievements of the pilot program thus far include the separation of certain decision-making (done by the board) from implementation (the role of company management). External directors bringing independent viewpoints also have strengthened the risk management capability and decision-making processes on strategy and investment plans.

Mr. Shao Ning, Vice Chairman of SASAC opened the Forum and outlined the progress the pilot boards have made over the past few years in improving corporate governance in their respective companies. Mr. Shao emphasized that Chinese SOEs must adapt to the new economic dynamics, follow the principles of sustainable corporate development, build modern corporations, and improve and optimize the corporate governance model in order for the enterprises to not only survive in the increasingly complex global market, but also to grow into global leaders.

In his keynote speech at the forum, Mr. Joseph B. Fuller, CEO of Monitor Group, addressed critical issues concerning corporate governance, including the allocation of decision rights among the board of directors, executive management and operating management. Based on the work of Monitor Group in corporate governance, he presented an effective governance model that Monitor has developed. In this model, he explained that operating management initiates recommendations on corporate strategy and implements the strategy. These responsibilities are separate from the board of directors and executive management, which ratifies or denies recommendations on strategy and assesses the results of how the strategy is implemented. Failures in corporate governance—such as those that occurred at Lehman Brothers, Enron, General Motors and American Airlines—occur when the governance system breaks down, when there’s a failure in information flow or a misalignment in incentives.

Mr. Fuller joined a panel discussion with Mr. Lejiang Xu, Chairman of Bao Steel Group Corporation (China’s largest steel company), Mr. Wen Ling, President of Shenhua Group Corporation Limited (China’s largest coal and coal chemical company), Mr. Zhengwu Ma, Chairman of China Chengtong Group (large conglomerate with business in logistics, metal trading and paper industry), Mr. Gengshu Miao, Chairman of SinoTrans (China’s leading logistics and shipping company) and Mr. Keqin Wen, Director of SinoPharma (China’s largest pharmaceutical company). The panel explored how the governance model in China could benefit from the new governance model and how it might be adapted for SASAC invested SOEs. The panel also had a rich discussion on strategic management, risk analysis and management, financial control, business performance and metrics, compensation incentives, and board culture development. Also participating in the discussion were Mr. Bing Li, Bureau Chief, Enterprise Restructuring, and Ms. Aibo Xu, Deputy Bureau Chief, Foreign Affairs, bureau staff from SASAC, representatives from the board of 24 pilot central SOEs and the leadership team from Monitor Group (China).

Monitor Group is working with SASAC to apply the latest corporate governance thinking to enable SASAC invested SOEs to achieve sustainable long term upper tier growth and profit performance while avoiding a number of the corporate governance failures in the developed countries that have occurred in recent years.

About SASAC

The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) was established in 2003. On the principle of separating government administration from enterprise management and separating ownership from management power, SASAC performs the responsibility as the investor on behalf of the state; supervises and manages the state-owned assets of enterprises according to law; and guides and pushes forward the reform and restructuring of SOEs. SASAC appoints top executives of the enterprises under the supervision of the Central Government, and evaluates their performance. SASAC also directs and supervises the management work of local state-owned assets. For more information, visit www.sasac.gov.cn.

About Monitor Group

Monitor Group works with the world’s leading corporations, governments and social sector organizations to drive growth on the issues that are most important to them. The firm offers a range of services—advisory, capability-building and capital services—designed to unlock the challenges of achieving sustained growth. Founded in 1983, Monitor brings leading edge ideas, approaches and methods to bear on clients’ toughest problems and biggest opportunities. Headquartered in Cambridge, Massachusetts, the firm employs more than 1,500 people in 22 countries worldwide. For more information, visit www.monitor.com.