The operation mode and profit distribution of modern corporate systems in hotels

**IV. Operation Mode of Modern Hotel Enterprise System**

A modern hotel enterprise system is a management system primarily focused on hotel executives, and therefore its operation mainly involves the forms and methods of senior management operations. Specifically, it includes three aspects:

(i) The board of directors exercises leadership authority over the hotel company's business decisions.

After adopting a modern enterprise system, hotels, whether wholly state-owned limited liability companies, limited liability companies, or joint-stock companies, must establish a board of directors or shareholders' meeting in accordance with the law. The board of directors is the highest authority and decision-making body of the hotel company, and its main responsibility is to exercise leadership over the company's operational decisions. Specifically, this includes four main aspects: first, the approval and decision-making power over major issues of the hotel company, such as IPOs, external investments, corporate restructuring, and renovation/expansion investments; second, the approval, decision-making, and supervision power over the hotel company's long-term plans, annual budgets, and budget final accounts; third, the power to appoint and decide on the appointment of the hotel company's senior and middle-level managers, headed by the general manager; and fourth, the approval and decision-making power over the hotel company's annual profit distribution or loss compensation and the approval and decision-making power over investor asset returns.

(ii) The supervisory board exercises its supervisory powers over the assets of the hotel company's investors.

After adopting a modern corporate system, all investments by the investment entity and investors are transformed into the legal property of the hotel company. The hotel company legally enjoys corporate property rights during its operation and management. The property of the investment entity or investors, after undergoing property registration, asset verification, stock purchase and transfer, and sales registration, is entrusted to the supervisory board for legal supervision. The supervisory board, legally composed of representatives of the investment entity or investors, supervises the use of the hotel company's investors' property, accounting, financial statements, accounting procedures, and major expenditures from a value perspective, in order to protect the safety, preservation, and appreciation of the investment entity's and investors' property and ensure asset returns. Members of the supervisory board do not participate in the hotel company's operation and management and may not concurrently hold positions such as board member, general manager, or deputy general manager.

(iii) The management team, headed by the general manager, exercises organizational and command authority over the operation and management of the hotel company.

After adopting a modern corporate system, the hotel's general manager is appointed by the board of directors, not by higher-level authorities or government agencies. The general manager, deputy general managers, department directors, and department managers all become senior and mid-level employees of the hotel company. Their management primarily employs a term-based target responsibility system. They will shed their status as "state cadres" and become mobile professional managers-a white-collar class based on the deepening development of the market economy. Their responsibility is to exercise organizational and command authority over the hotel company's operations and management under the leadership of the general manager. This is achieved through a hierarchical responsibility system under the leadership of the board of directors, with the general manager and department managers taking responsibility at each level. This system utilizes vertical leadership, hierarchical responsibility, division of labor, and close cooperation to effectively manage the hotel enterprise.

**V. Profit Distribution under the Modern Enterprise System of Hotels**

(I) Allocation Principles

After adopting a modern corporate system, the hotel's basic principle for profit distribution is to properly handle the relationships between the state, the enterprise, investors, and employees, combining tax payment according to regulations, corporate accumulation, profit sharing based on shares, profit sharing based on capital, and distribution based on labor, taking into account the rights and interests of all parties, mobilizing employee enthusiasm, and promoting the long-term development of the hotel company.

(II) Basis for Allocation

After adopting a modern enterprise system, the hotel company independently conducts business operations in accordance with the law, operating under a corporate legal person property right system. It implements a management approach of "independent accounting, self-responsibility for profits and losses, autonomous operation, self-development, and self-assumption of risks." Based on the principle of "covering expenses with revenue and achieving profitability," the hotel company uses its profits as the sole source and objective basis for profit distribution. If a loss occurs in a given year, employee salaries are paid first, and after paying taxes according to regulations, the company's reserves are appropriated, reducing or temporarily suspending equity distribution. Profit distribution is only carried out after profits are achieved and the previous year's losses are offset, in accordance with the law. Therefore, the basis for profit distribution under the modern enterprise system of the hotel is primarily the company's realized profits. This is both the sole source and the quantitative basis for profit distribution. The quantity and proportion of profits distributed to various parties are determined based on a balance of advantages and disadvantages, taking into account relevant provisions of the Company Law, the company's actual situation, and the distribution system.

(III) Allocation Order and Method

1. Adhere to paying taxes to national and local governments in accordance with regulations. This is not only a demonstration of the company's compliance with laws and regulations, but also a way for the hotel company to properly handle the relationships between the state, the company, investors, and employees, and to distribute profits accordingly. Essentially, all taxes paid by the hotel company come from the company's profits. The more taxes paid, the less profit the company will have. Therefore, paying taxes in accordance with regulations is a primary form of profit distribution for the hotel company. The specific amounts of various taxes are determined according to the tax types and rates stipulated by national and local governments.

2. The company implements a system of distribution based on performance, using a wage scheme and distribution system for its employees. Under the principle of distribution according to work and more pay for more work, differentiating between complex and simple labor, mental and physical labor, skilled and general work, and senior and junior management positions, etc., creates a graded wage system and distribution scheme. This fully reflects the principle of distribution according to work, motivates employees, and considers the interests of all parties. The specific amounts of wages, bonuses, social security contributions, and labor protection benefits that employees should receive will be determined based on the quantities or proportions stipulated by relevant national policies and regulations, the hotel company's profitability, and profit situation. The total amount of wages and bonuses will be determined first, and then implemented according to the wage scheme and distribution system.

3. The company must retain sufficient public reserve funds and public welfare funds as required. The hotel company's annual operating profits cannot be entirely distributed. To promote the company's long-term development and expand production, the company must retain sufficient public reserve funds and public welfare funds annually, provided that taxes are paid according to regulations and employee wages and bonuses are paid. The total amount of these funds should, in principle, not be less than 25% of the hotel company's registered capital each year. This can be appropriately reduced if losses or insufficient profits occur. The specific proportions and amounts of public reserve funds and public welfare funds must be determined by the hotel company's general manager and finance department, and approved by the company's board of directors. The use and expenditure scope of public reserve funds and public welfare funds must also be handled in accordance with the relevant provisions of national financial regulations and the Company Law.

4. Profit sharing based on shareholding and capital contribution is implemented for investment entities and investors. After the hotel company becomes a diversified limited liability company or joint-stock company, both investment entities and investors legally enjoy the right to benefit from the assets. Therefore, profit sharing based on shareholding and capital contribution is an important form of profit distribution for the hotel company. According to the Company Law, the distribution amount should, in principle, not exceed 6% of the par value of the shares (for joint-stock companies) or the par value of the shares issued (for limited liability companies). Based on this, the distribution amount for investment entities or investors is determined according to their investment ratio and shareholding ratio. The specific distribution method and procedures are decided by the hotel company's board of directors.