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SOEs’ employee stock ownership plan to help push reforms

Updated: Aug 26,2016 6:40 AM     english.gov.cn

As an important part of all-around reforms for State-owned enterprises (SOEs), the pilot program of an employee stock ownership plan (ESOP) at mixed ownership enterprises involves preserving and appreciation of State-owned assets.

The past 30 years of reform and opening up revealed that successful adjustments in social incentive mechanisms can unleash strong vitality. As the most challenging and sensitive issue of SOE reform, ESOP should avoid loss of State-owned assets through well-balanced employee incentives and State-owned asset preservation.

Efficiency and fairness are equally important in SOE reform, and ongoing efforts to enhance vitality of SOEs is a viable path to avoid unexpected depreciation caused by inefficient performance and asset losses due to unfairness.

Therefore, an active yet prudent ESOP should emphasize both incentives and restrictions. It has defined the scale and personnel applicable to such reform and specified an internal transfer and withdrawal mechanism of shares.

Such measures have demonstrated the principle of fairness and motivation, and safeguarded State-owned assets.

In the long run, an improving modern corporate system and rising market competitiveness is expected to enhance SOE vitality. The shared interests and risks under ESOP would effectively inspire employees’ activity and creativity.

As a good start, ESOP would allow employees and enterprises to share reform dividends and better preserve key State-owned assets concerning the national economy.

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