Research on the Basic Structure, Elements and Problems of Modern
Governance System of Power Grid Enterprises Under the
Requirements of High-Quality Development of State-Owned
Enterprises
Weixuan Meng
1,*
and Yingxue Gao
2
1
Dept. of Corporate Management Consulting State Grid Energy Research Institute, China
2
School of Electrical Engineering, Beijing Jiaotong University, China
Keywords: Power Grid Enterprises, Governance System, Modern Governance.
Abstract: The transformation and upgrading of the traditional power grid to the energy Internet greatly increases the
types and scale of market players that access the grid side and enter the power market, and put forward higher
requirements for enhancing the power grid enterprises' ability to enhance public services and the driving force
of the energy and power industry. On the basis of defining the basic elements and structure of the governance
system of power grid enterprises, this study conducts an in-depth analysis of the current situation and problems
of power grid enterprise governance, and proposes that power grid enterprises need to accelerate research on
corporate governance system, explore measures and suggestions for comprehensive reform pilot projects in
order to provide theoretical and directional guidance for power grid enterprises to realize "Modern
Governance" for world-class enterprises.
1 INTRODUCTION
The report of the 20th CPC National Congress
pointed out that we should deepen the reform of state-
owned assets and enterprises, upgrade the modern
enterprise system with Chinese characteristics, and
accelerate the construction of world-class enterprises,
which increases the requirements of high-quality
development of state-owned enterprises. General
Secretary Xi Jinping attached great importance to
speeding up the construction of a number of world-
class enterprises with "outstanding products,
outstanding brands, leading innovation and modern
governance". The narrow sense of corporate
governance refers to a mechanism of supervision and
balance between owners and operators, that is,
through a systematic arrangement, to reasonably
distribute the rights and responsibilities between
owners and operators. The broad sense of corporate
governance is not limited to the checks and balances
between shareholders and operators, but involves a
wide range of stakeholders (
Morck, 2009)
.
*
Corresponding author’s e-mail
The transformation and upgrading of the
traditional power grid to the energy Internet greatly
increases the types and scale of market players that
access the grid side and enter the power market, and
put forward higher requirements for enhancing the
power grid enterprises' ability to enhance public
services and the driving force of the energy and power
industry. The power grid company has been
emphasizing improving the corporate governance
capability and organically linking the corporate
governance system with the national governance
system, such as updating the organizational structure
(Meng, 2021), adjusting the responsibility and
authority system (
Scott, 1995)
, and optimizing the
strategic system (
Wood, 1998)
. Nevertheless, the
new situation and new requirements of the
construction of world-class enterprises and energy
Internet enterprises, power grid enterprises which tap
the governance potential, urgently makes theoretical
analysis on the basic elements and structure of the
governance system of power grid enterprises, and
evaluates the current situation and problems of power
grid enterprise governance accordingly. The
Meng, W. and Gao, Y.
Research on the Basic Structure, Elements and Problems of Modern Governance System of Power Gr id Enterprises Under the Requirements of High-Quality Development of State-Owned
Enterprises.
DOI: 10.5220/0012042800003620
In Proceedings of the 4th International Conference on Economic Management and Model Engineering (ICEMME 2022), pages 725-729
ISBN: 978-989-758-636-1
Copyright
c
2023 by SCITEPRESS – Science and Technology Publications, Lda. Under CC license (CC BY-NC-ND 4.0)
725
innovation of this paper is to provide theoretical
support for power grid enterprises to improve
governance capability and governance level (
Ansoff,
1965)
.
2 THE BASIC STRUCTURE OF
MODERN GOVERNANCE
SYSTEM
The governance system and governance capability of
state-owned enterprises are important components of
the national governance system and governance
capability. They are theoretical systems with
comprehensive characteristics and epochal
significance, which can be analyzed from three
levels: corporate governance system, group
management and control system, and operation
management system.
2.1 Basic Concepts
The corporate governance system is a corporate
governance structure established by enterprises in
accordance with relevant laws and regulations on the
basis of the separation of ownership and management
rights, as well as an incentive and restraint,
coordination and balance mechanism.
The group management and control system is an
efficient integration system for large enterprise
groups to coordinate and control the relationship
between their member enterprises and integrate
resources and businesses based on the property link;
The operation management system is the business
operation system and functional support system built
by enterprises in the process of business operation
and management.
2.2 Relationship of the Three
Subsystems
Corporate governance system, group management
and control system, and operation management
system are the basic elements or perspectives of
modern enterprise management system, which are
interdependent, organic linkage, and coordinated
operation. For enterprise group, the corporate
governance system (from the perspective of
stakeholders) is the basis for an enterprise to become
an independent legal person under the property rights
system, which can be regarded as the basic "form" of
the enterprise group. The group control system (from
the perspective of the group headquarters) is the
organizational structure and operating mechanism of
the enterprise group's control subsidiaries, which can
be seen as the "skeleton" of the enterprise group. The
operation management system (from the perspective
of business management) is the professional and
refined support and assistance for enterprises to carry
out value chain activity, and can be seen as the
"tendon" of the enterprise group.
3 THE BASIC ELEMENTS OF
MODERN GOVERNANCE
SYSTEM
3.1 The Corporate Governance System
Firstly, the corporate governance system belongs to
the basic system of enterprises. Constrained by
national laws, regulations and policies, the
governance structure of subsidiaries intersects with
the group management and control system, which
determines whether the parent company can exert
direct influence on the operation and management
system of subsidiaries. The corporate governance of
the enterprise group connects and standardizes the
relationship of rights, responsibilities and interests
among the group owners, the Party committee
(leading group), the board of directors, operators,
employees and other stakeholders. In addition to
solving the relationship among the board of
shareholders, the board of directors and the
management of the enterprise group, it also involves
the relationship between the enterprise group and all
subsidiaries at the governance level, that is, the
control and subordinate legal relationship between
the parent and subsidiary companies.
Secondly, China has established a basic legal
system of corporate governance based on the
Company Law, and has put forward clear legal
requirements for the governance of the shareholders'
meeting, the board of directors, the board of
supervisors, and the managers. At the same time, with
the deepening of the reform of state-owned
enterprises, the dominant position of the Party
organization in governance has gradually matured in
policy and practice, and has been clarified at the level
of administrative regulations. The Fifth Plenary
Session of the 19th Central Committee of the
Communist Party of China put forward that "we
should adhere to the Party's overall leadership over
state-owned enterprises, promote the unity of
strengthening the Party's leadership and improving
corporate governance, and accelerate the
ICEMME 2022 - The International Conference on Economic Management and Model Engineering
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establishment of a corporate governance mechanism
with statutory powers and responsibilities,
transparent powers and responsibilities, coordinated
operation, and efficient checks and balances."
3.2 The Group Management and
Control System
Firstly, the essence of group management and control
is a set of management methods and institutional
arrangements established by the enterprise group
based on the property connection between parent and
subsidiary companies. By implementing management
control and resource coordination and allocation for
subordinate enterprises or departments, resources can
be effectively deployed in a wider range to achieve
efficient utilization and strategic coordination. The
group control mode determines the allocation of core
resources such as people and property.
Secondly, the group management and control
system is the key to efficient operation of enterprise
group. Influenced by enterprise attributes and
resource endowments, the management and control
mode selection, organizational structure and
responsibility design of the enterprise group need to
comprehensively consider the positioning of the
group headquarters and the governance and
management capabilities of its subsidiaries.
Generally, it can be divided into indirect control
relationship and direct control relationship. The
indirect control relationship refers to that the parent
company mainly controls the operating activities of
the subsidiary through the board of directors of the
subsidiary, and the control of the parent company is
only reflected at the level of the board of directors.
Direct control refers to that the members of the board
of directors of the subsidiary are all executive
directors from the parent company, and the parent
company's board of directors directly nominates the
senior management of the subsidiary, which can
directly affect the operation and management of the
subsidiary.
3.3 The Operation Management
System
Firstly, in a narrow sense, enterprise operation
management refers to the general term for the
planning, organization, implementation and control
of business activities such as product or business
supply, research, production and marketing. It is a
command and coordination management system that
runs through all systems of enterprise business
creation. In a broad sense, enterprise operation
management is a management activity that focuses on
the whole process of enterprise business value
creation, takes the enterprise business value chain as
the center, strategic planning as the starting point,
planning management as the leader, and performance
incentive as the core, systematically drives the
management of all links and functions of the
enterprise value chain, and ensures the coordinated
operation of all kinds of resources and functions, so
as to maximize the operating efficiency of the
enterprise and continuously improve the working
efficiency. The overall enterprise operation
management system can include strategic
management, business management, functional
management, digital management, corporate culture
management, etc.
Secondly, the operation management system is
relatively independent, but it is directly affected by
the group's control system and business attributes.
Under diverse corporate governance systems and
group management and control systems, there are
significant differences in the vertical design and
functional soundness of the operation management
system. Generally, for subsidiaries with mature
products, complete systems, efficient management
and single shareholder, more emphasis is placed on
centralized, institutionalized and standardized group
management and control mode. For subsidiaries with
more product innovation, low management
standardization and multiple shareholders, more
authorization and on-site decision-making authority
are required. The parent company participates in
corporate governance as a shareholder.
On the basis of Mintzberg's prototype of
enterprise organizational structure and Porter's
concept of enterprise value chain activities ， this
research explores and constructs the basic model of
modern governance system of power grid enterprises,
as Table 1 presents:
Research on the Basic Structure, Elements and Problems of Modern Governance System of Power Grid Enterprises Under the Requirements
of High-Quality Development of State-Owned Enterprises
727
Table 1: The basic model of modern governance system of power grid enterprises.
4 THE PROBLEMS OF MODERN
GOVERNANCE SYSTEM
On the basis of the basic model of modern governance
system of power grid enterprises, this paper selects 28
problems from 9 aspects on the modern governance
system. The 9 aspects include governance system
design, subsidiary enterprise governance mechanism,
management and control mode and governance
integration, business classification control, incentive
and restraint mechanism of market-oriented units,
power grid business management mechanism,
business process and mechanism optimization, cross
departmental horizontal coordination, connection
between business and management data, as Table 2
presents:
Table 2: The problems of modern governance system of power grid enterprises.
4
4
2
3
3
3
3
4
2
012345
Connection between business and
management data
Cross departmental horizontal
coordination
Business process and mechanism
optimization
Power grid business management
mechanism
Incentive and restraint mechanism of
market-oriented units
Business Classification Control
Management and control mode and
governance integration
Subsidiary enterprise governance
mechanism
Governance system design
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5 CONCLUSION AND
ENLIGHTENMENT
In the new situation of profound changes in the
energy and power industry and the new requirements
of state-owned enterprise reform and electric power
reform, power grid enterprises need to accelerate
reform and innovation and management reform, take
deepening reform as a means to constantly remove
institutional and institutional barriers, continue to
optimize and update the corporate governance
system, and enhance corporate governance
capabilities.
Firstly, according to the general standpoint of
"classified governance and differential management
and control", with the goal of establishing a scientific
and efficient group governance structure and
management and control system, and realizing the
modernization of corporate governance, we
organized and carried out special research on
corporate governance system and governance
capacity building, strengthened overall planning and
top-level design, and systematically put forward the
optimization and improvement plan of corporate
governance system to adapt to the new situation and
new requirements.
Secondly, select some provincial companies and
market-based units to carry out comprehensive
reform pilot projects such as improving the
governance system, optimizing the management and
control mode, and reforming the system and
mechanism first. Give incentive policies to pilot
enterprises, encourage exploration and innovation,
and summarize a package of solutions based on pilot
experience.
ACKNOWLEDGMENTS
Authors wishing to acknowledge support from State
Grid Company’s Science and Technology Project
"Research on the construction of corporate
performance evaluation index system, key
technologies and empirical analysis under the
requirements of high-quality development of state-
owned enterprises".
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Research on the Basic Structure, Elements and Problems of Modern Governance System of Power Grid Enterprises Under the Requirements
of High-Quality Development of State-Owned Enterprises
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