Workers forced to buy worthless shares in restructured state-owned enterprise

05 June 2008
Workers in restructured state-owned enterprises (SOEs) have been consistently denied the right of legal redress for violations of their rights by Supreme People’s Court decisions in 2000 and 2003, which stated that disputes arising from SOE restructuring were not labour disputes and therefore could not be decided by the civil courts.* The Supreme Court’s policy remains in effect today, and has forced workers from restructured SOEs to take to the streets to press their claims for adequate compensation and for government investigations into alleged management corruption and embezzlement.
In 1997, the state-owned Dazhou Automotive Transport Co in Sichuan was transformed into a joint-stock company. Management threatened every worker with dismissal if they refused to buy at least 3,000 yuan worth of company stock. In order to keep their jobs, about 90 percent of the 3,000 workers bought their company’s shares. However, most did not obtain a shareholding certificate or dividends from the company, nor did they have any rights as shareholders. In 2004, the company underwent another round of restructuring, and management urged workers to buy another 15,000 yuan worth of stock in order to qualify as “genuine” shareholders of the company, sparking outrage and protests among the workers.
In October 2007, CLB Director Han Dongfang talked to workers’ representative, Jia Lingen, about the company restructuring process, the subsequent protests and the workers’ thwarted efforts to obtain redress through legal channels.
During the initial restructuring of Dazhou Auto, the company promised to pay workers 450 yuan for every year of employment at the company. Since Jia had worked more than ten years at Dazhou, he was entitled to a payout of at least 4,500 yuan. He never got his money. Instead, Jia said, the payout was diverted to the registered capital of the newly established joint stock company.
“As long as a company doesn’t ask the state for money, the state will not check the company’s assets. We knew what was going on. The company had stolen state assets, but the government didn’t want the hassle of checking the company accounts, so management was free to gradually reduce the company’s asset value over the next few years.”
Purchase shares or get the sack
Not only did the workers not get their bonus, they were told that they would have pay out at least 3,000 yuan for shares in the company. “They announced that those who didn’t pay 3,000 yuan would be fired. The workers were really scared! In reality a lot of workers weren’t willing to give 3,000 yuan, but after the announcement, nearly everybody paid up. Some workers turned to their relatives to borrow money,” said Jia. “But now the company refuses to recognize our share certificates.”
The ten percent of employees who refused to pay up did not get dismissed as feared, said Jia. “The threat was only meant to scare workers into paying.”
Since 1997, 1,000 workers have been laid off and replaced by new workers on short-term contracts. Jia, a truck driver at the company, and many of his colleagues, lost their jobs because management sold off the trucks: “They didn’t go through us, but unilaterally sold those trucks before our contract period ended. If they sold the trucks, they should arrange other jobs for us, right? But they never did anything for us.”
“At that time, because the company kept all the information to itself, the workers didn’t fully understand the restructuring process. After we fought for our rights, we gained access to documents, which revealed the true picture.”
The company has never held a shareholders meeting nor has it elected a new board every three years as mandated by China’s Company Law. Worker shareholders never received any dividends.
No legal recourse
The company was restructured again in 2004. Jia claimed the real purpose of this second restructuring was to enable senior managers to get their hands on the company’s assets. “When we saw the restructuring plan, we were furious. The chairman simply grabbed the majority share for himself without paying for it. He just wrote that he owned a majority share, and had raised the money to acquire the shares from minority shareholders. It just took a word from him.”
Jia claimed the chairman gained the majority share of the company by fraudulently using funds from the workers. “In 2004, we went for the company, but the company was not responsive. Then we sought the government. We blocked the government building entrance several times. That was a time of really intense protest.”
It was only after these protests that the company was forced to publish its accounts. The workers then discovered that Dazhou Auto had been receiving workers’ pension fund contributions but had never once paid out pension payments to retired workers.
In 2006, the company again underwent restructuring, after which it no longer recognized the workers’ shares. As a result, in 2006, Jia and several hundred of his colleagues tried to sue the company and its chairman in the local intermediate court, but their lawsuit was rejected. According to a court document seen by the workers, the lawsuit was rejected on the grounds that the company’s restructuring, over which the dispute arose, was part of the Chinese government’s policy of reforming SOEs, and hence ineligible for civil court adjudication.
Jia disputed the court’s argument, claiming that since 1997, the company was no longer a SOE. However, the workers’ lawyer resigned the following month in August 2006, leaving the workers to represent themselves in subsequent suits to the higher courts. Jia claimed the lawyer withdrew his service because he had been bribed by Dazhou Auto.
On 23 March 2007, the Sichuan Provincial High Court notified them that it had accepted their lawsuit, with a hearing set on 2 April 2007. Just before the hearing, the workers were told that the High Court “had made a mistake”, and referred them back to the earlier court decision.
“We were so angry we nearly cried,” Jia said.
Subsequently, all courts have refused to accept the case, which is still in limbo. Without a job, Jia relies on a monthly pension of 340 yuan plus the meager funds of his wife, who does odd jobs. At the time of the interview, Jia was 50 years old.
* On 28 October 2000, the Supreme Court’s deputy chief justice Li Guoguang stated: “When enterprises make workers redundant, all issues relating to unpaid wages are specific phenomena arising from the process of enterprise and employment system reform. They are not issues arising from performance of labour contracts. Therefore, such disputes should be resolved by the competent authorities in line with overall policy provisions for enterprise reform. These cases are not labour conflicts and should not be heard in the civil courts.”
On 26 March 2003, Supreme People’s Court deputy chief justice Huang Songyou explicitly stated at a session of All-China civil law working conference that: “No collective disputes triggered by wage arrears at SOEs due to state industrial policy or corporate restructuring can be accepted for the present (by the courts)… Persuasion must be used, conflicts must be defused, and settlements reached in coordination with branches of government concerned.”
Han Dongfang’s interview with Jia Lingen was first broadcast in eight episodes in October 2007. To read the full Chinese transcript or listen to the audio file of the broadcast please go the workers’ voices section of our Chinese language website and follow the links.
Back to Top

This website uses cookies that collect information about your computer.

Please see CLB's privacy policy to understand exactly what data is collected from our website visitors and newsletter subscribers, how it is used and how to contact us if you have any concerns over the use of your data.