Question time puts former regulator to test
WHEN SHI CUIMING, executive vice-president of red chip China Unicom and a former telecommunications regulator, was openly challenged by a minority shareholder at the company's most recent annual general meeting, it was an unusual experience for the former veteran industry regulator.
In the three years since China Unicom was listed, shareholder meetings chaired by the 63-year-old Mr Shi had been a mere formality, attracting only a limited attendance, with questions rarely put to the board.
So when corporate governance activist David Webb put questions to Mr Shi during the AGM and suggested ways in which the state-owned enterprise could improve its corporate governance, it came as a bit of a surprise.
Listed in June 2000, China Unicom was the second mainland telecoms carrier to be listed overseas. China Unicom has become an arch-rival and competitor for mobile subscribers to the main player China Mobile, which listed three years prior.
The Informer spoke to Mr Shi, a former chief financial officer of China Mobile, as he rejected observers' claims that the dominant mobile carrier (China Mobile) has higher corporate governance standards, and dealt with issues raised by Mr Webb.
Q: People say China Mobile has better corporate governance than China Unicom, do you agree?
A: Both are good companies. I think there are a lot of things we can learn from each other.
Q: David Webb's representative praised China Mobile's chairman Wang Xiaochu for the company's good corporate governance. China Unicom didn't receive such praise, why?
A: Mr Webb left before the meeting was finished. Judging from the questions that he raised, I think Mr Webb was quite friendly to us.
Q: Were the issues raised by Mr Webb valid?
A: I think some of his questions were worth our consideration, in terms of improving our corporate governance in the future. But some of his questions should really be addressed to the regulators.
Q: Did you consider any of his challenges to be unreasonable?
A: Among the seven resolutions passed at the meeting, Mr Webb objected to one of them, which would provide a general mandate authorising the company to issue up to 20 per cent of new shares.
He was going by the British system, where companies only seek a 5 per cent mandate. I think he should discuss this issue with the exchange.
Whether it's the HKEx [Hong Kong Exchanges and Clearing] or the Securities and Futures Commission, they designed these rules with good reason and I think we've fulfiled the relevant requirements under the listing rules.
Q: How are you going to improve China Unicom's corporate governance?
A: We want to increase the involvement of non-executive directors and independent directors. We're planning to hire one more independent director with financial expertise to join the audit committee to better protect our shareholders' interests. Of our 10 directors, so far we have five non-executive directors including four independents, which is more than regulations require.
Another area we are working on is to ensure the accuracy of the information we disclose. We have established disclosure controls and procedures requiring the general managers of the subsidiaries at all tiers to sign the reports they submit, to certify that all the operational data and financial data is true and accurate. This is in response to the Sarbanes-Oxley Act, which requires both the CEO and the CFO to sign the annual report, to testify to the accuracy of the information being disclosed.
Q: What marks would you give China Unicom for its standards of corporate governance over the past three years?
A: I'll let you be the judge. It's very difficult for me to give myself marks. If I gave myself high marks, it would look like I'm not being humble enough. But if I give myself too low a score that would be unfair also.
Let's talk about our view. I was involved in China Mobile's listing, followed by China Unicom's. As a Chinese company, credibility is very important. If your company doesn't have credibility, it will be very difficult to survive and prosper.
Throughout the past three years we've been working hard to improve our fundamentals, management skills, investor relations and corporate governance. I believe China Unicom had established a fairly solid basis to become a world-class operator.
Q: How far are your corporate governance standards from getting full marks?
A: Corporate governance standards are constantly changing in accordance with the prevailing circumstances. This is a long-term mission.