Step by step Hong Kong looks to be making headway in modernising its corporate governance codes. The days of controlling shareholders at public firms ripping off minority owners with impunity may have passed if proposed changes to the stock exchange's listing rules are acted upon. This matters because Hong Kong has trailed other markets, including the mainland, in upgrading its investor protection codes.
Significant vested interests are being tackled in proposing changes that threaten dominant shareholders' ability to gouge wealth from minorities using legal loopholes. They are likely to be overcome due to recognition that improved transparency and beefed-up minorities rights are needed lest Hong Kong be marginalised as an equity raising and trading centre.
The SAR's biggest firms have such market power that blatant shareholder rip-offs have become rare. The new rules target the raft of medium-sized firms that are often personal enrichment vehicles for their major shareholders.
In doing so they chip away at the legal armoury used by abusers. Definitions of 'connected transactions' between listed firms and private entities, linked to a major shareholder, are to be tightened. The mandatory use of shareholder polls in cases affecting minorities' interests should help greatly.
Naming and shaming often is as powerful a disincentive as formal penalties. The proposed detailed disclosure of directors' remuneration is welcome given the trend of sharply rising boardroom pay-outs despite falling profits. Adopting international norms such as remuneration committees, which decide directors pay, is a good step but likely demands deeper reforms that ensure genuine boardroom independence.
By imposing quarterly reporting standards Hong Kong is catching up with centres such as Singapore and the mainland. The objection that firms will be saddled with costly administrative burdens does not stack up. Well-managed firms should have such basic financial information readily to hand.