State-Owned Enterprise Compliance in Tongling and Yangtze River Delta Integration
1. Introduction
The integration of the Yangtze River Delta has been elevated to a national strategy, aiming to promote regional "integration" and "high-quality" development and create an economic growth pole and a new highland for reform and opening up. The "Outline of the Yangtze River Delta Regional Integrated Development Plan" sets a macro framework for the operation and development of state-owned enterprises.
In this context, "compliance" of state-owned enterprises has evolved from the traditional bottom line of law-abiding to the internal driving force to enhance core competitiveness and achieve sustainable development, and the concept of compliance creating value has been deeply rooted.
Tongling City in Anhui Province plays an important role in the Yangtze River Delta industrial chain with its profound industrial foundation in non-ferrous metals, fine chemicals and other fields. It faces tasks such as industrial transformation and upgrading and undertaking industrial transfers. With the deepening of integration, the compliance construction of Tongling state-owned enterprises needs to actively integrate the advanced concepts of Shanghai, Jiangsu and Zhejiang, and also to deal with the severe compliance challenges brought about by the unification of rules and the leap from "local" to "regional unified" and even "internationally advanced".
This article aims to analyze the new requirements and risks of the integration of the Yangtze River Delta on the compliance construction of state-owned enterprises in Tongling City from a legal perspective, review the current status and shortcomings of its compliance management, and combine advanced experience to explore an optimization path for the state-owned enterprise compliance management system that conforms to Tongling's actual conditions and adapts to the needs of integrated development.
2. Macroscopic background, legal framework and experience reference
(1) Legal framework and policy guidance for compliance management of state-owned enterprises at the national level
In recent years, our country has attached great importance to the construction of compliance management systems for state-owned enterprises. As the state-owned assets regulatory agency, the State-owned Assets Supervision and Administration Commission of the State Council plays a core role in promoting compliance management of central enterprises and local state-owned enterprises.
"Measures for the Compliance Management of Central Enterprises": This is the core document currently guiding the compliance management of central enterprises and even local state-owned enterprises. The "Measures" clarify the basic principles of compliance management (such as adhering to the leadership of the party, comprehensive coverage, objective independence, business integration, implementation of responsibilities, etc.), and require enterprises to establish and improve a compliance management organizational system in which "the main person in charge takes overall responsibility, the general counsel or the person in charge of compliance management takes the lead, the legal or related functional departments are specifically responsible, and the business departments are each responsible for their own responsibilities." The "Measures" emphasize embedding compliance requirements into business processes, strengthening compliance management in key areas (such as market transactions, ecology and environmental protection, production safety, labor and employment, finance and taxation, intellectual property rights, data protection, business partners, etc.), and highlighting compliance assessment and accountability.
"Guidelines for Compliance Management of Central Enterprises (Trial)": Although it has been replaced, its concepts such as the "three lines of defense" model (business departments are the first line of defense, compliance management leading departments and relevant functional departments are the second line of defense, and discipline inspection, supervision, auditing and other departments are the third line of defense) are still of reference value.
Other relevant laws and regulations: such as the Company Law, "Enterprise State-owned Assets Law", "Anti-Monopoly Law", "Anti-Unfair Competition Law", "Environmental Protection Law", "Data Security Law", "Personal Information Protection Law", etc., together constitute the external legal environment for the compliance operations of state-owned enterprises.
The policy guidance at the national level clearly shows that compliance management has changed from a "soft constraint" in the past to a "hard requirement" and is a required course for state-owned enterprises to achieve high-quality development and prevent systemic risks.
(2) Experience in compliance construction of state-owned enterprises in the Yangtze River Delta first-mover areas (taking Shanghai as an example)
As the leader in the integration of the Yangtze River Delta, Shanghai's state-owned enterprises started early in compliance management and have made more in-depth explorations, providing valuable reference for Tongling City.
1. Improved top-level design: Shanghai State-owned Assets Supervision and Administration Commission issued compliance management guidelines for municipal state-owned enterprises earlier, clarifying the organizational structure, division of responsibilities, operating mechanisms and safeguards for compliance management.
2. "List-based" management: Shanghai state-owned enterprises generally implement a compliance risk list and a compliance responsibility list system for key positions, making abstract compliance requirements concrete and itemized to facilitate implementation and supervision.
3. "Embedded" management: Emphasize embedding compliance review into key business links such as major decisions, important contracts, key projects, etc., to achieve deep integration of compliance management and business operations.
4. Digital empowerment: Actively use big data, artificial intelligence and other technologies to build compliance management information systems to achieve dynamic monitoring, intelligent early warning and efficient disposal of compliance risks. For example, some companies have developed smart contract review systems and business partner compliance due diligence platforms.
5. Pay attention to the cultivation of compliance culture: enhance the compliance awareness of all employees through regular training, case warnings, compliance commitments, etc., and create an atmosphere of "compliance for everyone and compliance for everything".
6. Industry characteristics and international standards: Develop targeted compliance guidelines based on the characteristics of different industries (such as finance, shipping, manufacturing, etc.). For companies with international business, they pay close attention to international rules and overseas compliance requirements.
Shanghai’s experience shows that effective compliance management is a systematic project that requires strategic guidance, institutional guarantees, technical support and cultural penetration.
(3) Current status, progress and main challenges of compliance construction of state-owned enterprises in Tongling City
In recent years, Tongling City has also begun to attach importance to and promote the compliance management of state-owned enterprises.
1. Initial progress
(1) Policy guidance: Tongling Municipal State-owned Assets Supervision and Administration Commission has issued guidance documents related to the compliance management of municipal enterprises that are in line with local realities, such as the "Tongling Municipal Enterprise Compliance Management Guidelines (Trial)", etc., which provide preliminary framework guidance for the compliance construction of municipal state-owned enterprises.
(2) Budding awareness: Some state-owned enterprises with larger scales or stronger risk awareness have begun to realize the importance of compliance management and are trying to set up compliance positions or clarify compliance management responsibilities.
(3) Focus on key areas: In traditional high-risk areas such as production safety, environmental protection, and bidding, companies have accumulated certain management experience.
2.Main challenges and gaps:
(1) Compliance awareness lags behind: Some corporate leaders have insufficient understanding of the strategic value of compliance and still regard it as a cost rather than an investment, and the responsibilities of the "top leaders" in compliance are not fully implemented. At the employee level, there may be misconceptions such as "compliance is a matter for the legal department." This cognitive bias leads to insufficient investment in compliance resources and makes it difficult to realize the strategic value of compliance management.
(2) Inadequate system construction: Most companies have not yet established a systematic and normalized compliance management system, and lack a clear organizational structure, clear division of responsibilities and complete institutional processes. The construction of the “three lines of defense” is weak, and the phenomenon of “two skins” between compliance management and business processes still exists.
(3) Insufficient risk identification and assessment capabilities: Lack of sensitivity to emerging risks (such as data compliance, fair competition, intellectual property rights, etc.) emerging in the context of Yangtze River Delta integration, and lack of active identification, assessment, and early warning mechanisms.
(4) Lack of professional talents: There is a shortage of comprehensive compliance professionals who understand both law and business, making it difficult to support high-level compliance management work.
(5) Compliance culture has not yet been formed: the compliance concept has not been truly internalized into corporate culture and employee behavior habits, the reward and punishment mechanism is incomplete, and the incentive and restraint effects of compliance have not been fully exerted.
(6) The level of digital application is not high: The informatization and intelligence level of compliance management is far behind that of first-mover regions, and it still relies on the traditional manual management model.
3. New requirements and special risks faced by Tongling state-owned enterprises from the perspective of Yangtze River Delta integration
The integration of the Yangtze River Delta is not only an opportunity, but also a comprehensive test of corporate governance capabilities. The unified and open market environment and convergent regulatory standards have caused Tongling state-owned enterprises to face many new compliance requirements and potential risks.
(1) Fair competition and compliance risks intensify
1. New requirements: Integration requires breaking down administrative barriers and local protections and building a unified, open, competitive and orderly market system. The enforcement of the Anti-Monopoly Law and the Anti-Unfair Competition Law will be strengthened at the regional level.
2.Special risks
(1) Monopoly agreement: the risk of reaching an agreement or coordinated behavior with peers in the region to fix prices, divide the market, limit output.
(2) Abuse of dominant market position: While having a dominant market position, conduct unfair high prices, refuse transactions, restrict transactions, tie-in sales or attach unreasonable transaction conditions.
(3) Illegal implementation of concentration of undertakings: mergers, acquisitions and reorganizations without declaration or in violation of regulations.
(4) Commercial bribery and improper benefit transfer: In the process of market expansion, improper means are adopted to obtain transaction opportunities or competitive advantages.
(5) False propaganda and commercial slander: publishing false information to attack competitors or mislead consumers.
3. Legal consequences: high fines, confiscation of illegal gains, orders to stop illegal activities, civil compensation, damage to reputation, etc.
(2) Improvement of ecological and environmental protection compliance standards
1. New requirements: The Yangtze River Delta region has a joint prevention and control mechanism in terms of ecological and environmental protection. Environmental protection standards are becoming stricter and more consistent, and the environmental protection responsibilities of enterprises are required to be higher. Green development and carbon peak and carbon neutrality goals pose rigid constraints on high energy-consuming and high-emission industries.
2.Special risks
(1) Excessive discharge and illegal discharge: pollutant discharge does not meet regional uniform or higher standards.
(2) Improper disposal of solid waste and hazardous waste: Industrial solid waste and hazardous waste are disposed of in violation of regulations.
(3) Irregular environmental information disclosure: environmental information is not disclosed as required or false information is disclosed.
(4) Ineffective emergency response to environmental emergencies.
(5) Dual energy consumption control does not meet the standards: it does not meet policy requirements in terms of total energy consumption and intensity control.
3. Legal consequences: administrative penalties, criminal liability, ecological environment damage compensation, production suspension for rectification, project ban, reduction of corporate environmental credit rating, etc.
(3) Data compliance and information security challenges
1. New requirements: The implementation of laws and regulations such as the "Data Security Law", "Personal Information Protection Law", and "Cybersecurity Law" has put forward comprehensive regulations on corporate data processing activities (collection, storage, use, processing, transmission, provision, disclosure, etc.). The integrated flow of data elements in the Yangtze River Delta region is accelerating, and compliance requirements for cross-border data transmission, sharing and opening are more complex.
2.Special risks
(1) Excessive collection and abuse of personal information: Collect and use personal information of customers, employees, etc. without consent or beyond the scope of necessity.
(2) Data leakage and security incidents: Data leakage, damage, and loss due to technical loopholes or improper management.
(3) Compliance risks of important data exported abroad: No security assessment has been conducted when important data exported abroad.
(4) Supply chain data security: Insufficient control over the data processing behavior of suppliers and partners leads to joint and several liability.
3. Legal consequences: high fines (up to 5% of turnover or 50 million yuan), suspension of business for rectification, license revocation, civil compensation, criminal liability (such as infringement of citizens’ personal information).
(4) Compliance risks in investment, financing and mergers and acquisitions activities
1. New requirements: The integration of the Yangtze River Delta promotes the flow of capital factors across regions, and state-owned enterprises have more opportunities to participate in regional investment, financing, mergers, acquisitions and reorganizations. This requires companies to conduct adequate compliance due diligence before transactions and follow strict legal procedures during the transaction process.
2.Special risks
(1) Insufficient due diligence: Insufficient review of the financial, legal, business, environmental protection, labor and other compliance status of the M&A target or partner, leading to “ill-intentioned acquisitions” or cooperation risks.
(2) Information disclosure violations during the financing process: providing false information or major omissions during bond issuance, equity financing, etc.
(3) Risk of loss of state-owned assets: Non-compliance in asset evaluation, transaction pricing, decision-making procedures, etc. may cause losses to state-owned assets.
(4) Violation of industrial policies and market access: investment projects do not comply with national or regional industrial guidance, or enter restricted or prohibited fields.
3. Legal consequences: transaction failure, investment losses, administrative penalties, civil litigation, and relevant responsible persons being held accountable.
(5) Intellectual property protection and application risks
1. New requirements: The Yangtze River Delta is committed to creating a highland for intellectual property protection and encouraging innovation and collaboration. While enterprises enjoy regional innovation dividends, they also face stricter intellectual property protection requirements and more complex infringement risks.
2.Special risks
(1) Patent, trademark, and copyright infringement: Infringement of other people’s intellectual property rights in product development, production, sales, publicity, etc.
(2) Leakage of business secrets: Business secrets such as core technologies and business information are not well protected and are stolen by internal employees or external partners.
(3) Intellectual property traps in technology introduction and cooperation: In technology transfer, licensing, and cooperative development, intellectual property rights ownership is unclear or the terms are unfavorable.
(4) Insufficient protection of independent intellectual property rights: applications for protection of one’s own innovative achievements are not timely and insufficient, and are preempted or counterfeited by others.
3. Legal consequences: cessation of infringement, compensation for losses (possible punitive damages), administrative penalties, damage to goodwill, and loss of market competitive advantage.
(6) Labor employment and product quality and safety compliance
1. New requirements: In the context of integration, labor factors flow more frequently, and standards for the protection of workers’ rights and interests within the region tend to be unified and improved. The unified market has also put forward higher requirements for product quality and safety standards, and consumers' awareness of the protection of rights and interests has increased.
2.Special risks:
(1) Irregular labor contracts and employment management: failure to sign labor contracts in accordance with the law, illegal termination of contracts, wage arrears, overtime work, insufficient social security payments, etc.
(2) Insufficient occupational health and safety protection: Standard working conditions and safety protection are not provided.
(3) Product quality defects and false propaganda: Products do not meet national, industry or regional mandatory standards, or there are exaggerations or false propaganda.
(4) Infringement of consumer rights: inadequate after-sales service and improper handling of consumer complaints.
3. Legal consequences: labor arbitration and litigation, administrative penalties, product recalls, civil compensation, damage to brand image, market ban.
4. Optimization of paths for compliance construction of state-owned enterprises in Tongling City
Facing the opportunities and challenges brought about by the integration of the Yangtze River Delta, Tongling City's state-owned enterprises must elevate compliance construction to a strategic level, take the initiative to make changes, and advance systematically.
(1) Strengthen top-level design and establish strategic leadership in compliance
1. Board guidance and commitment: The board of directors should incorporate compliance management into the corporate governance system and overall development strategy, regularly listen to compliance reports, review and approve compliance strategies, basic systems and annual plans, and provide sufficient resource guarantees for compliance management.
2. Clarify the goals and positioning of compliance management: Combine compliance goals with the company's mid- and long-term development plans, and clearly define that the value of compliance management lies not only in risk prevention, but also in improving governance levels, optimizing operational efficiency, shaping brand image, and creating business value.
3. "Top Leader" Project: The main person in charge of the enterprise must effectively perform the duties of the first person responsible for compliance construction, publicly express the importance and support for compliance, take the lead in complying with compliance requirements, and promote the formation of a top-down compliance atmosphere.
4. Establish an independent compliance management department or identify the leading department: Based on the size and risk profile of the enterprise, establish a chief compliance officer and establish a relatively independent compliance management department with clear rights and responsibilities or designate the legal department, risk control department, etc. as the leading department to ensure the professionalism and authority of its performance of duties.
(2) Learn from first-mover experience to build a customized compliance management system
1. Learn from the best practices in Shanghai, Jiangsu and Zhejiang: In-depth study of the successful cases of state-owned enterprises in Shanghai, Jiangsu, Zhejiang and other places in terms of compliance system architecture, system construction, risk list, information tool application, etc., and select the best.
2. Combine Tongling’s industrial characteristics with the actual situation of the enterprise: To avoid copying, the characteristics of Tongling City’s pillar industries such as non-ferrous metals, chemicals, and advanced manufacturing, as well as the differences in scale, business model, risk exposure, etc. of different enterprises, should be fully considered, and a targeted and operable compliance management system should be designed. For example, for chemical companies with high environmental pressure, their compliance systems should focus on strengthening environmental compliance modules.
3. Dynamic management of the "three lists": Establish and dynamically update the "Compliance Risk Identification List", "Compliance Responsibilities List of Key Positions" and "Compliance Review Process List". The risk list should cover all business areas and management links, and be adjusted in a timely manner according to changes in laws and regulations and business development.
4. Improve the system and process: Develop a comprehensive basic compliance management system, compliance guidelines in various special areas (such as anti-commercial bribery, data protection, export control, etc.) and clear compliance review, reporting, consultation, investigation, assessment, accountability and other work processes.
(3) Implement a proactive and full-process risk management mechanism
1. Prevent beforehand: Risk identification and assessment: Establish a normalized compliance risk identification mechanism, not only focusing on known risks, but also predicting potential risks and emerging risks. Use risk matrix and other tools to assess the likelihood and impact of identified risks, and determine key risks that should be prioritized for management and control.
2. In-process control: Integrate into business processes: Embed compliance requirements and review nodes into the front-end of the business, such as key links such as contract conclusion, project investment, product research and development, marketing, procurement and bidding, to achieve "moving forward" compliance management and make compliance an integral part of the business process.
3. Post-event response: Monitoring, reporting and disposal: Establish a compliance risk monitoring system to detect violations or potential risks in a timely manner. Smooth compliance reporting channels (including anonymous reporting and "whistleblower" protection mechanisms). For violations that have occurred, we will quickly initiate investigation procedures, take corrective measures, hold relevant responsibilities accountable, and summarize experiences and lessons to prevent similar incidents from happening again.
4. Continuous improvement: Regularly evaluate and audit the effectiveness of the compliance management system, and continuously optimize compliance policies, systems and processes based on internal and external environmental changes and evaluation results.
(4) Promote regional compliance coordination and mutual recognition of standards
1. Actively align with the advanced standards of the Yangtze River Delta: Pay close attention to the unified standards or coordinated supervision policies issued by the Yangtze River Delta region in key areas (such as environmental protection, market access, data sharing, etc.), and proactively meet the standards.
2. Participate in regional compliance exchange platforms: Actively participate in regional state-owned enterprise compliance forums, seminars, training and other activities in the Yangtze River Delta, and strengthen experience exchange and information sharing in compliance management with state-owned enterprises in Shanghai, Jiangsu and Zhejiang.
3. Explore the feasibility of mutual recognition of regional compliance: When conditions are mature, we can explore the mutual recognition of state-owned enterprise compliance results between Tongling and other cities in the Yangtze River Delta in specific fields or specific qualifications, reduce the cost of repeated certification, and improve the overall regional business environment.
(5) Accelerate the digital and intelligent transformation of compliance management
1. Build an integrated compliance management information platform: Integrate resources such as laws and regulations library, risk database, case library, system process library, etc. to achieve centralized management and sharing of compliance information.
2. Use technology to empower risk management and control: explore the application of big data analysis for risk trend prediction and abnormal behavior monitoring; use artificial intelligence to analyze massive public data and specific databases, carry out compliance risk profiling and continuous monitoring of business partners, and improve the efficiency and depth of due diligence; conduct compliance training and assessment through online learning platforms.
3. Improve data-driven decision-making capabilities: Provide decision-making support to management through the collection and analysis of compliance data, timely discover management loopholes, and optimize resource allocation.
(6) Vigorously develop human capital and consolidate the foundation of compliance talents
1. Pay equal attention to cultivation and introduction
(1) Internal training: Strengthen compliance training for existing legal, risk control, internal audit and business backbones to enhance their professional capabilities and cross-domain knowledge. Encourage employees to take compliance-related qualification certification exams.
(2) External introduction: According to needs, recruit compliance professionals with rich experience from the market, especially compound talents who are familiar with the rules of the Yangtze River Delta region and compliance requirements of specific industries, and establish a market-competitive salary incentive mechanism to attract and retain high-end compliance talents.
2. Clarify compliance responsibilities at all levels: Not only the compliance department, but also business departments, functional department heads and key position personnel should assume corresponding compliance management responsibilities and reflect them in their job descriptions and performance appraisals.
3. Establish an effective incentive and restraint mechanism: Incorporate compliance performance into the performance appraisal and salary incentives of employees and management, reward those with excellent compliance performance, strictly hold violations accountable, and form positive incentives and reverse constraints.
(7) Cultivate an internalized compliance culture and create a compliance atmosphere for all employees
1. Leadership takes the lead in setting an example: Senior managers of enterprises should lead by example, take the lead in learning compliance knowledge, comply with compliance requirements, and convey compliance values through words and deeds.
2. Regular compliance publicity and training: Use various forms (such as special lectures, case studies, online courses, knowledge competitions, compliance manuals, etc.) to carry out all-staff, hierarchical and classified compliance education to enhance employees' compliance awareness and risk identification capabilities.
3. Strengthen compliance communication and consultation: Establish convenient compliance consultation channels, encourage employees to consult and report on compliance issues, and eliminate employees’ doubts and confusion about compliance.
4. Integrate compliance into corporate values: Integrate concepts such as "integrity and law-abiding, compliant operation" into the corporate mission, vision and core values, make compliance an important part of corporate culture, and ultimately achieve the transformation from "I want compliance" to "I want compliance".
The national strategy for the integration of the Yangtze River Delta has brought unprecedented development opportunities to Tongling City and its state-owned enterprises, and also set higher standards for its governance capabilities and risk control levels. Compliance construction is no longer an optional option, but a strategic cornerstone related to the survival and development of enterprises. State-owned enterprises in Tongling City must deeply realize the extreme importance and urgency of compliance management in the context of integration, use legal review as a guide, use path optimization as a starting point, actively learn from the successful experience of first-mover regions, and combine their own actual conditions to systematically build a modern compliance management system that is compatible with high-quality development and matches the requirements of integration.
This requires enterprises to start from top-level design and integrate compliance into strategies; be risk management-oriented and embed into business processes; use digitalization as a means to improve management efficiency; use talent development as support to consolidate professional foundations; use cultural cultivation as the soul to create an atmosphere for all employees. Through the above systematic efforts, Tongling City's state-owned enterprises can effectively prevent and resolve various legal risks that may be encountered during the integration process, enhance core competitiveness, and shape a responsible corporate image, so as to ride on the tide of higher-quality integrated development in the Yangtze River Delta, make steady progress, and contribute more to Tongling City's economic and social development.