-Practical research and comments of China Huaneng Group
Huaneng Group is one of the top 100 state-owned enterprises in China, which was established in August 1988. At present, Huaneng Group consists of core enterprise (China Huaneng Group Corporation), 9 member companies and 400 subsidiaries, and also directly controls 30 overseas branches and companies. Among them, Huaneng International Power Development Corporation and Shandong Huaneng Power Development Corporation are listed on the New York Stock Exchange, 1994. Since its establishment, Huaneng Group has been exploring how to effectively control its subsidiaries, how to assess their performance and what kind of incentive mechanism to choose.
I. Control of subsidiaries
China Huaneng Group can be divided into three levels: core enterprises, member companies and business divisions. The first layer is the parent company, the second layer is the subsidiary, and the third layer is another kind of subsidiary (the so-called business department). During the overheated economy in the 1980s, Huaneng Group once had four or five floors. However, after several years of restructuring and improvement, Huaneng Group now has only three levels.
In the past, the parent company only assessed "two financial statements" (balance sheet and income statement) and "one person" (general manager) for its subsidiaries, and did not supervise the subsidiaries strictly. This model has great disadvantages, because it cannot control the decision-making mistakes of subsidiaries and the huge losses caused by them, and such losses are often irreversible. The risk of "ex post facto control" is considerable.
At present, China Huaneng Group not only gives its subsidiaries some flexibility, but also implements necessary monitoring. The parent company's control over its subsidiaries is mainly reflected in three aspects: (1) personnel control. Including the appointment of managers, the determination of annual salary, and the determination of the number of positions in various functional departments of each subsidiary. (2) Investment control. The existing regulation is that the investment amount exceeds a certain limit and needs the approval of the parent company. For example, for some large subsidiaries, the independent investment limit is 30 million yuan, and for small companies it is 5 million yuan. (3) Financial performance control. The annual financial target is the actual operating results of the previous year. Financial performance is evaluated from three aspects: profit, return on net assets and cash flow from operating activities. As a result, few subsidiaries can't achieve their goals. The expected return on equity (ROE) is 15%, but due to policy subsidies and other factors, the ROE of power business can be slightly lower, about 10%.
Second, Huaneng Group's performance appraisal system
Huaneng Group's performance appraisal system has experienced three stages of development: the first stage is the "target system" stage (1989- 199 1). The assessment indicators at this stage are mainly absolute quantities, such as the output unit of main products, completion percentage, profit, loan repayment, management fees, etc. The main defect of this system is that the investment effect is not evaluated, which makes the investment of subsidiaries out of control.
The second stage is "responsibility system for contracted operation" (1992- 1996). In addition to profit indicators, the system has also added some indicators reflecting operating efficiency, such as return on net assets, appreciation of net assets, repayment of parent company loans and profit delivery. However, the problem of this system is that different subsidiaries have different profit levels, so it is impossible to achieve the purpose of assessing operating efficiency with unified standards. At the same time, the system does not consider the monitoring of the process.
The third stage is "performance appraisal system" (since 1997). In order to investigate the investment benefit and consider the differences in different industries, Huaneng Group changed the contract responsibility system to the performance appraisal system in 1997. Huaneng Group also adjusted the assessment indicators to reflect the operating efficiency and process control, such as adopting the ratio of return on net assets. At the same time, in order to reflect the debt risk and solvency, and change the phenomenon of high debt in Huaneng Group, Huaneng Group used return on total assets instead of net asset appreciation. With the deepening of reform, the power production subsidiary of Huaneng Group has become an independent enterprise. For electric power production subsidiaries, the new system emphasizes the control of production process, and adopts indicators such as power generation, profit, loan repayment and safety measures. For those branches mainly engaged in the management of energy companies, indicators such as profit and return on equity are used.
1, performance appraisal standards for electric power production subsidiaries (factories)
Since 1997, the parent company of China Huaneng Group has been using the following four standards to assess the annual performance of its power production subsidiaries: (1) actual power generation units and planned power generation units (kWh); (2) Actual profit and planned profit; (3) Actual monthly repayment amount and planned monthly repayment amount; (4) Safety measures of the factory. The evaluation criteria are as follows:
① The power output is basically divided into 40 points. Every time the actual output differs from the planned output by 1%, it will increase or decrease by 1 min until it increases or decreases by 20 points.
② The profit standard is basically divided into 10 point. For every difference 1% between the actual profit and the planned profit, increase or decrease by 0.5 points until increase or decrease by 10 points.
③ The basic score of financial standards is 50 points. For each deferred payment of 1%, 1 minute will be reduced until it is reduced by 20 points.
(4) There is no score in the standard of factory safety measures, but in case of safety accident, Huaneng Group will deduct the total wages of its subsidiaries. In case of major accident, 500,000 yuan will be deducted; In case of major accident, RMB 654.38+10,000 will be deducted.
The highest score, standard score and lowest score that meet all four standards are 150, 100 and 50 respectively.