Since the Central Economic Work Conference set the mixed ownership reform as where China’s state-owned enterprises (SOE) can make breakthroughs on reforms in early 2017, enterprises at all levels, from central to local state-owned, have continuously introduced new measures and new deployments involving the reform. The mixed ownership reform (hereinafter referred to as the "mixed reform") introduces flexible market response mechanisms and innovative management systems from private enterprises into state-owned enterprises to enhance the market awareness of state-owned enterprises, to increase their own competitiveness, vitality and creativity. It aims to build a system that conforms to modern corporate governance and better responds to market changes. At present, the mixed reform of state-owned enterprises has achieved initial results. In spite of a gradual increase in the number of enterprises, quite a few are still in a wait-and-see situation. Only a few have actually completed the mixed reform. In addition, although government departments have announced the top-level design plan for the mixed ownership reform, there is no ready-made operating system to borrow experience from. Therefore, it is necessary to conduct research on the mixed-ownership reform from practical cases and explore its feasible paths to provide reference for other enterprises.
The mixed ownership reform is a comprehensive reform involving property rights, rooted in not only changes to the ownership structure, but also system and mechanism revolutions. In the course of reform, enterprises take different paths and design various incentive mechanisms to suit different markets and governance objectives, which in turn will have an impact on corporate performance. The configuration of incentive mechanisms after the reform comes as the key to assessing whether the reform achieves expected results. On this basis, the paper focuses on the relationship between innovating incentive mechanisms and enterprise performance in the context of the mixed ownership reform of state-owned enterprises and sets the goal of research at incentive mechanisms for mixed-reform enterprises. In the case study of Yunnan Baiyao and Greenland Holdings Corp., Ltd., the paper starts with the internal and external environment of enterprises to analyze the causes and paths of their mixed reforms, examines the relationship between incentive mechanism adjustments and corporate performance in the two companies, reveals the problems existing in incentive mechanisms in the course of practicing the reform, and puts forward suggestions for improvement.
On the basis of the property rights theory, the principal-agent theory and the incentive mechanism theory, the author builds the basic theoretical and practical framework for incentives through analyzing the needs of senior managers, human nature assumptions and behaviors, expounds the impact of the problems occurring in the current mixed ownership reform of state-owned enterprises on incentive elements, and carries out empirical examination and case analysis of incentive mechanisms. For the analysis of core elements, this paper sees the optimal salary system as an entry point and compares such key points as salary incentives, equity incentives, and spiritual incentives. It also tries to construct a complete and practice-oriented incentive system against the background of the mixed property rights reform, supplemented by management systems with Chinese characteristics, including the governance structure of "three meetings and one layer", the disciplinary mechanism of party organization supervision, and the market-oriented recruitment of managers.
Our work has led us to four conclusions as follows. Firstly, increasing capital and shares should be a new breakthrough in the mixed ownership reform of state-owned enterprises, by which corporate capital can be expanded (to make a larger company) and corporate vitality strengthened (to make a stronger company). In particular, it can effectively promote the governance efficiency of state-owned enterprises during the mixed ownership and formulate a win-win situation. Secondly, equity incentives have become a common model to drive company performance. Under the incentive model of virtual equity, senior managers can enjoy certain dividends and the rights of share price appreciation without weakening the state-owned holding status or impairing the equity structure. Meanwhile, immediate right to earnings will work as an effective incentive for managers and in turn affect current corporate profits. Thirdly, status conversion to private enterprises is an effective channel for job transfer and a more appealing incentive than retention in state-owned enterprises. The channels for executive transfer for the mixed ownership reform of state-owned enterprises include the tenure transfer of former state-owned enterprise managers appointed by administration, the market-based recruitment and hiring of external professional managers, and the identity transfer of private entrepreneurs. Fourthly, building a business partner sharing mechanism is a more productive incentive than performance distribution. The mixed ownership reform of state-owned enterprises must bring creative changes to talent management, redefine the relationship between managers and enterprises, treat employees as the “partners of human capital” to break away from the original employment relationship, and turn the management into the owner of an enterprise and professional managers into the masters, thus enabling employees to share the wealth brought by corporate development.
The highlight of this paper rests on the study of problems related to the mixed ownership reform of state-owned enterprises from the perspective of corporate governance through multiple cases. At present, most domestic literature discusses the reform paths from the level of a single equity or case. Few researchers have addressed incentive mechanisms in a systematic way. In the course of analysis, the author fans out from point to area, analyzes the obstacles to the mixed ownership reform of China’s state-owned enterprises in a comprehensive, clear pattern, and proposes applicable solutions to paint a reasonable roadmap for the reform. Therefore, the value of our contribution lies in two aspects. In terms of theory, it explores the internal mechanism that explains how the property rights reform contributes to corporate performance from the angle of incentive mechanisms and enriches multi-dimensional theoretical research on incentive mechanisms. Supported by the analysis of the principal-agent system in the mixed ownership reform, this paper connects the system with the incentive mechanism of the property rights reform, deduces the internal mechanism of the property rights reform that works on corporate performance improvement, studies the relationship between incentive mechanisms and the improvement of corporate performance, and investigates the key mechanism that enhances corporate performance via deconstruction analysis. With respect to practice, our research aims to provide state-owned enterprises with theoretical guidance on the paths of the mixed ownership reform and offer insights into the formulation of policies for the mixed reform.