Dickson disclosure silence deafens
For anyone seeking a little mental distraction this typhoon weekend a gentle wander through Chapter 14 of the stock exchange's listing rules is sure to burn some time.
Where regulatory codes in other financial centres make do with short guidance notes on 'connected transactions' the Hong Kong rule book goes into exhaustive detail.
The reason is the prevalence of family-dominated companies and their penchant for shuffling assets between public and private firms.
The recent chapter 14 misdemeanour by Dickson Concepts (International) (DCI) was hardly unique. It was just so brazen that even corporate-governance jaded Hong Kong gasped with horror.
The idea that a HK$130 million consultancy fee, paid to a private company of the chairman, should not be publicly disclosed barely stands scrutiny.
Whether it should have been paid at all raises multiple governance issues. Since most firms now outsource Internet services to specialists, realising they can do a better and cheaper job, it also begs serious questions about management competence.
To re-cap, last December DCI agreed to pay HK$130 million to a private company of its chairman, Dickson Poon, for services linked to setting up its new cyber mall and a shopping centre in Kowloon. These costs have already being been booked to the soon-to-be-spun-off subsidiary Dickson Cyber Concepts.
It also agreed to buy HK$110 million worth of start-up equipment from suppliers chosen by Mr Poon's Dickson Management Consultancy. No mention was made of any connections between the suppliers and Mr Poon.
Sounds odd? You might think so but the stock exchange has only said it reserves the right to take action.
This transaction is the latest of many between Mr Poon's public and private companies that raised eyebrows. The terms on which he privatised prime European assets, including swanky London retailer Harvey Nichols, were widely considered less than generous.
The point is, of course, that with a signed accountant's valuation, the difference between what is 'fair' value and what is legal can be enough to keep the chairman in silk ties for many years.
Reports by London property agents that the Harvey Nichols property is on the market for about HK$880 million indicate a huge potential windfall.
What is so glaring about this case is the large payment for services that the chairman's private firm would seem to have no particular expertise in.
DCI cites payment for developing 'portals', 'high technology infrastructure' and 'multimedia special effects'.
The first question is why didn't the public company undertake these services itself? If it could not, why not hire experts? There is no supporting evidence of the track record of Mr Poon's private consultants.
As for the HK$110 million procurement programme, surely a big public company would have more buying clout? In a subtle effort to suggest there is lots of Internet savvy within the Dickson empire, the company says it has actively pursued an 'e-commerce' strategy since 1996.
Interesting, since that is just about the time Softbank first invested in Yahoo! The odd thing is that Mr Poon waited until last December to start his Cyber Concepts venture.
From a broader market stance the pity of this case is the absence of public voices offering criticism.
When contacted on Thursday, Edward Chow Kwong-fai, chairman of the Hong Kong Society of Accountants corporate governance committee, refused to comment on the case.
Despite being a leading professional body, with statutory powers, he cited his upcoming listing-committee hearing for a Growth Enterprise Market listing of his own as a reason not to comment.
When such a figure is unprepared to take a stand, what hope is there for an improved governance culture? Questions should be asked of Edwin Ing, a DCI executive director and company secretary. He is a former chairman of the Hong Kong Institute of Company Secretaries and has beaten the corporate governance drum in public forums.
His job is to ensure the board is properly informed of its fiduciary duties and that disclosures are proper and timely.
All concerned should perhaps be advised to take advantage of the inclement weather and spend some time reading chapter 14. If nothing else they might learn to be less obvious next time around.