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Keeping power in check
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In an online communication with netizens at the weekend, Premier Wen Jiabao said that excessive concentrations of power bred corruption, and that effective checks are needed.

The involvement of almost all leaders of a State-owned enterprise in a recent corruption case is perhaps the best illustration of Premier Wen's point.

The announcement of this case by the State-owned Assets Supervision and Management Commission of the State Council last week is a reminder that supervision of leaders of State-owned firms is still far from watertight.

This incident coincides with a clarion call for reducing salaries of leaders in these enterprises. Another investigation suggests that quite a number of them have violated rules by holding shares in their own firms or holding down sideline positions for extra pay.

As Premier Wen said, a better system is key to the fight against corruption.

State-owned firms are supposed to be owned by all citizens in name. But it is impossible and unrealistic for all citizens to participate in their corporate management models.

State-owned asset management commissions at various levels are supposed to make sure State-owned assets increase in value.

But their value does not have anything to do with the commissions and neither with leaders of these organizations.

So it is quite possible for supervision to lack substance.

The same is true with leaders of State-owned firms.

They are only entrusted with the firms, whose profitability often does not have anything to do with how much they're paid.

Even if their bonuses are related to how much profit their firms make, the fact they will work as leaders for a given period of time only serves as a disincentive for them to concern themselves with firms' long-term development and viability.

It takes time to restructure the corporate system of State-owned firms. But it is possible to increase the transparency of their management.

It is also possible to have a clear-cut system of rewards and penalties, which will also work with the current management of State-owned firms.

The current economic slowdown provides the central government a prime opportunity to reform the corporate management system, which should at least make it possible for workers within State-owned enterprises to exercise their right to supervise their leaders.

Still a reasonable supervision system needs to be put into place to oversee how leaders of these firms exercise their power.

(China Daily March 2, 2009)

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