Govt report reveals listed firms' weak governance

Internal control in some Chinese listed firms remained flimsy while some others lack the incentives to improve their corporate governance, revealed a latest government report.

Of the 2,489 listed companies on Shanghai and Shenzhen bourses by the end of last year, 2,312 firms made public their internal control reports, accounting for 92.9 percent of the total, said a report jointly written by the Ministry of Finance, China Securities Regulatory Commission (CSRC) and Shandong University of Finance and Economics.

However, only 428 companies shed light on their internal control weaknesses, accounting for 18.5 percent of the firms that publicized internal control reports, according to the joint report released Friday.

"Some listed companies only paid lip service to internal control, while internal control in a small number of companies is not objective and impartial," it noted.

Internal control refers to systemic processes used by companies in their budget control, daily operation, compensation, subsidiary companies management, performance assessment, personnel training, among others.

The report urges better-quality disclosure of listed companies' internal control practices and tightened grip on the power enjoyed by the chairman or CEO of these companies.

The authorities are endeavoring to improve Chinese firms' corporate governance. On a similar note, the China Banking Regulatory Commission, China's top banking watchdog, last month announced an updated policy of internal control for commercial banks.