Listed companies under fire over reception costs

The exorbitant spending on receptions by some Chinese listed companies has came under fierce criticism from netizens in the midst of the country's campaign against extravagance. The Shanghai and Shenzhen stock exchanges required all listed companies to release annual reports for 2012 by the end of April. These reports showed that the reception costs of nine companies exceeded 100 million yuan (16.1 million U.S. dollars), according to statistics from Panorama Network Co., Ltd, a financial information provider. The top 10 companies in terms of reception costs, including mostly state-owned enterprises (SOEs), spent a total of 2.9 billion yuan on receptions last year. China Railway Construction Corporation Limited topped the list with a total spend of 837 million yuan, equivalent to about 10 percent of the company's profit last year. The figures came under fire in cyberspace, as a frugality campaign has been ongoing across the country since December. Hundreds of Chinese websites have so far run reports on the companies' reception costs. On Sina's Weibo, China's most popular microblogging service, more than 170 postings focused on this topic after the news came out Monday morning, gaining thousands of reposts and comments in the same day. A comment by someone with the screen name "Gengtian 40 Nian" postulated that the excessive reception expenditure allows room for corruption, saying "the reception fee would be better called a corruption fee." Famous Weibo commentator Laoxu Shiping said in a posting that China Railway Construction's reception fee may well exceed the given figure. A netizen with the screen name "Sanshanliushui Woheshan" called for the release of details on how exactly the money was spent. "Who is receiving it? What are they doing for it and how much does it cost?" the netizen asked. Chinese premier Li Keqiang vowed in March to keep expenditure on government overseas visits, vehicles and receptions from growing during his tenure. Most government departments have cut their spending in the three areas as part of the frugality campaign that prohibits officials and military officers from engaging in extravagant behavior. Some people argue that listed firms, especially SOEs, should also comply with the requirements of the campaign as their funds belong to shareholders. Sun Lijian, a professor with Fudan University, said in a Weibo posting that the exorbitant reception spending may be closely related to more deep-rooted problems. "[These companies] can obtain more business opportunities by offering receptions and gifts, which may be a root for corruption among the top management and the unfair competition between SOEs and privately owned companies," Sun said. The high expenses may also be related to low efficiency in the companies' internal governance and a potential problem of tax evasion, according to the professor. He urged companies to unveil detailed information about reception fees, although corporate law does not make this a requirement at present.