Key takeaways from the Hong Kong Corporate Governance Round table 2017
My colleague, Angel Cheng, and I attended the Corporate Governance Roundtable at the Kowloon Shangri-La Hotel 13 March 2017, hosted by the Companies Registry and supported by major regulators and professional bodies including the SFC, HKEX, HK Institute of Chartered Secretaries and the HK Institute of Director. It was a well-organized and well attended event with over 400 company secretaries, corporate governance and risk professionals, lawyers, INEDs and CEOs from companies of all sizes in attendance.
Updates from Hong Kong
The Keynote Speech was delivered by Professor K C Chan, GBS, JP (Secretary for Financial Services and the Treasury) of the HKSAR Government. In his speech, he was keen to emphasise Hong Kong’s natural strengths as an international financial and business centre – namely having an efficiency tax system, a level playing field for all, a clean & effective Government, and the rule of law, and hence why there are 1.3 million companies registered in Hong Kong.
To maintain competitiveness, company law has and is continuing to be rewritten, modernizing legislation to strengthen the accountability of directors, increase accountability of companies (Annual Reports must contain review their environmental impacts, compliance, relationship with suppliers, etc to allow investors to make better decisions), and there are ongoing discussions regarding implementing a licensing regime for Corporate Service Providers (CSPs) and trust companies (something which Singapore already has) to ensure they are “fit and proper” to serve clients.
Lessons Learned from Abroad
A number of speakers from around the world shared their experiences and revealed valuable lessons to Hong Kong’s regime:
Tim Moss, CBE (Registrar of Companies of England and Wales), highlighted how important Corporate Governance is with examples of how poor corporate governance has crippled businesses, such as Baring, BHS and SportsDirect. One of the recent successes is a massive overhaul of how company data can be retrieved. Now, all data requests are free, and can be accessed electronically, which has led to a huge surge of data requests which means shareholders, investors and analysts are now making more informed decisions, which makes for a stronger market.
Kenneth Yap (Accounting and Corporate Regulatory Authority, Singapore) also highlighted the important of technology and real time data (including sharing between government departments). Companies and directors in violation of SGX listing rules had typically faced prosecution, but this is a costly and labour intensive process. They now adopt a “name and shame” approach – public reprimands has been an effective deterrent.
Dr Cao Yong (China Securities Regulatory Commission) spoke about the sweeping reforms China is undergoing, including the need to regulate SOE and pseudo-SOEs more rigorously, enhance disclosure requirements, and increase social responsibility to catch up with international standards.
What Makes an Effective Board Leader
Another session which I enjoyed a lot was the topic of Effective Board Leadership. Ivan Tam (Executive Director and Deputy MD, Chevalier Group) went through a thorough presentation on what makes an effective board leader, and it echoes the thoughts of what my clients look for (and also of a previous blog post of mine):
1) Hard Working – a Named Company Secretary is not ceremonial. There’s a lot to do, and you must have an active interest in the company’s affairs (this is actually a requirement in the Listing Rules)
2) Engaging – you have to be able to understand the key drivers of the business and be engaged (two way communication) with both the business and the board members. You’re expected to help set the strategy for maximizing share value and you need to be engaged to do this effectively.
3) Diversity – you should be able to add value in different ways, not just in regurgitating listing rules. Board members would like your input in strategy and broad regulatory matters. You are there to guide meetings, and to prevent group thinking.
4) Long term – Every good board leader looks at the long term impacts of decisions. Decisions may be made slower, but with more consideration due, decisions tend to be better. You should also consider the ESG (Environmental and Social Governance) related factors of business decisions, and learn how to priorities strategic objectives & goals.