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

Dept. of Corporate Management Consulting State Grid Energy Research Institute, China

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

 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

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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.

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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Scott. Institutions and Organizations [M], Thousand Oaks,

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Wood E. Determinants of innovation in SME’s [J]. See

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of High-Quality Development of State-Owned Enterprises

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