By staff reporter Shen Hu and Fan Junli

Shanghai based Fullgoal Fund Management Co., Ltd. recently announced an overhaul of its senior executive personnel. The company’s initiative signals a big step toward free-market hiring practices in state-owned financial institutions.

There are two kinds of senior executives in the current Shanghai financial system: one is appointed by the party committee; the other is selected through competitive hiring. The top chiefs in the industry still tend to arrive at their post via the former, meaning they own their jobs to the local government.

Within government appointment personnel, there are some variations that depend on the rank and importance of the position. District level chiefs are usually appointed by the Shanghai Municipal Government’s personnel department, while vice-district level chiefs and below are chosen by the Shanghai Municipal Labor Committee.

Committee appointed officials and market selected professionals differ in that the latter earns a much higher salary, while officially appointed mangers do not compete on the market to get jobs. Without competitive hiring, local state-owned financial companies complain that they cannot attract the best and brightest.

But the pattern of governmental selection is changing. After Yu Zhengsheng became the General Secretary of the Shanghai Municipal Government and Tu Guangshao was appointed the vice mayor overseeing the financial sector in 2007, they have emphasized on several occasions that financial talents are crucial for building an international financial center.

Fullgoal’s reshuffle is a sign that shifting attitudes are having an impact. Founded in 1999 by five securities firms, the company has grown to manage 11 funds and their assets under management topped 60 billion yuan by end of 2007. However, internal strife has tainted much of Fullgoal’s success.

The three biggest stake holders are Haitong Securities, Shenyin Wanguo, and the Bank of Montreal, each of which owns 27.775 percent of Fullgoal. Among them, the two local shareholders, Haitong Securities and Shenyin Wanguo, have long held varied opinions about how to run Fullgoal best. And it is no secret that the current general managing director, Li Jianguo, and deputy general manager have open conflicts.

An insider source from Fullgoal Fund said that the senior management does not put much effort into building sales volume and that its performance is far below the board’s expectation. But with Haitong Securities backing Li, the management remained staunch in its habits.

Another insider said that the current equity research and investment chief, Mr. Chen, does not have a style in line with the investment style of the company. Since 2005, the Bank of Montreal has encouraged the company to create an autonomous equity pool, which should be kept separate from fund managers by a rigid firewall. But, Chen disagreed with this idea, insisting that the equity pool should be controlled by management of the investment department.

Internal struggles continued until early 2008 when one shareholder finally appealed to the local financial labor committee for government interference.

Thus, the local government became the organizer for recruitment. It is said to be the second test for the Shanghai financial system. The first was in the second half of 2007, when three vice presidents were recruited from the global market at Shenyin Wanguo Securities.

This time, though, competitive hiring has reached all the way down to the general manager position. The largest three fund management companies based in Shanghai have their senior executives appointed by the local party committee.

The open competition for Fullgoal Fund may become a watershed for personnel reform within the Shanghai financial system. An inside source said that from now on personnel in the state-owned financial institutions, such as banks, securities firms, fund management companies, may all rely on competition to decide their next employees. It is not only a matter of who takes what position. The change will also affect the interests and power balance of the local government.

Yet a fund manager based in Shanghai said that the open selection of senior managers at Fullgoal is still far away from a purely market-driven trend. The call for applicants spread within a small circle, and the competition proceeding was not know by many outsiders.

The current deputy general manger of Jiashi Fund Management, Dou Yuming will become Fullgoal’s new general manager; the current Fullgoal deputy general manager Xie Wei will oversee market and business development; and Chen Ge from Fullgoal Tianyi Fund will be made the head of equity research and strategy – all pending regulators’ approval.

What position Fullgoal’s current general manager Li Jianguo will settle into is unclear, but it’s certain that his next post will be designated by the Shanghai Municipal Labor Committee, a local party committee for the financial sector. The current senior executive in charge of research and investment Chen Jiwei, will resign and retreat from the sector.