Chinese corporate governance crusader fired for fraud

Hong Kong-listed China Mobile, the world’s largest mobile phone company, has dismissed vice chairman Zhang Chunjiang amid allegations of “serious financial irregularities”.

Mr Zhang, who according to a Financial Times report was a leading proponent for increased accountability for boards of directors and senior managers at state-owned enterprises (SOE), has also been removed as communist party secretary and vice-president at the mobile phone company’s main subsidiary in China.

Reports quoting the Chinese-language Caijing Magazine allege that Mr Zhang is suspected of hiding losses at a previous company. He is alleged to have concealed losses at China Netcom, another telecoms provider, ahead of its merger with China Unicom in 2008.

The FT report says that Mr Zhang is particularly noted for his efforts to improve corporate governance at SOEs by balancing the interests of the Chinese Communist Party, with those of minority shareholders.

According to the China Daily, Chinese officials have recently pledged to target corruption by high-ranking executives at state-owned enterprises, after a string of corruption scandals involving senior SOE executives last year.

They included Kang Rixin, former general manager of China National Nuclear Corporation, who has been under investigation for “grave discipline violations” since August. In July, Chen Tonghai, a former chairman of Sinopec, was sentenced to death for taking almost 200 million yuan in bribes.

“We will push ahead with investigations and try to curb corruption in SOEs in restructuring, mergers, and acquisitions, property transactions and construction projects,” said Qu Wanxiang, a vice-minister of supervision. The report said that Chinese graft-busters will focus on senior-ranking executives, and will seek to mete out severe penalties for bribery, and for setting up slush funds that are off the books.

The report also said that the Chinese government has been seeking to improve corporate management at SOEs. It quoted Lin Yueqin, an economist at the Chinese Academy of Social Sciences, as saying that this effort was hampered by a system whereby SOE executives are appointed by central authorities. This gives way to abuses of power, because corporate boards of directors often do not have the authority to properly supervise the appointed executives, he said.