Elite have trouble with the concept of accountability

PUBLISHED : Tuesday, 19 February, 2008, 12:00am
UPDATED : Tuesday, 19 February, 2008, 12:00am

Do the members of Hong Kong's elite of inherited wealth understand the meaning of the words accountability and responsibility? David Li Kwok-po has now stepped down from the Executive Council, albeit reluctantly and without being obviously pushed by a chief executive who seemed inclined, not for the first time, to put personal relationships ahead of principles.

Mr Li is a personable individual who has always sought to be friends with everyone, straddling political and other fences with ease, despite a naturally shy disposition. He is not the kind of person to induce anger or resentment in others. But that does not explain why supposedly responsible individuals have rushed to defend the indefensible.

For sure, Mr Li personally never made money out of the leak of news, entrusted to him in confidence as a member of the board, of the impending Rupert Murdoch bid for Dow Jones. But the fact that he was not charged with a criminal offence, but was instead required to pay a civil penalty of US$8.1 million, cannot hide the serious nature of the leak.

According to the US Securities and Exchange Commission, Mr Li received the news in the evening on April 12 last year. Next morning, he flew to Shanghai with his friend Michael Leung Kai-hung. On arriving in Shanghai, Mr Leung contacted his son-in-law who contacted his broker, Merrill Lynch, and began heavy buying of Dow Jones shares, accumulating some 415,000. During this time he was, according to the SEC, in touch with Mr Li on more than one occasion. When the Murdoch bid was announced, the shares jumped to about US$56 from the US$36 average price paid by Mr Leung. He has had to disgorge his profits and pay an equivalent penalty.

It beggars belief that someone who is on the board of at least 10 publicly listed companies does not understand the importance of confidentiality in this kind of situation. He must have realised that a Murdoch bid for Dow Jones would be a matter of global interest, as well as a major market-moving event.

Whether Mr Li wanted to do his friend a favour, or was just talking loosely, is not known. But it is a huge embarrassment for Hong Kong. It will be an even bigger one if cronyism allows the issue to be treated lightly, thereby giving the impression that insider trading and breach of trust are taken lightly in what claims to be a well-regulated financial centre.

Yet fellow senior figures have rushed to Mr Li's defence as though he were a victim not a culprit. Bernard Chan, another inherited-wealth Exco member, and a lawmaker who represents the insurance industry, was quoted as saying: 'I actually find it unfair. Indeed, he has done nothing wrong. He shouldn't shoulder any responsibility.' Laura Cha Shih May-lung, a fellow Exco member and former vice-chairman of the China Securities Regulatory Commission, also regretted Mr Li's decision to quit Exco.

Are these people fit to be on numerous boards, let alone various government advisory panels, if they cannot see anything wrong in directors telling their friends confidential board information? Do they regard insider trading as acceptable just because it is not illegal in Hong Kong?

Whether the bankers re-elect Mr Li, who has represented them in the Legislative Council for two decades, is up to them. The finance sector re-elected Chim Pui-chung although he had done time in jail for forging documents. Almost anything is possible in the dysfunctional world of functional constituencies, where business interests engage in commercial bargains with the government. As for the other companies on whose boards Mr Li sits, most are family controlled and unlikely to put principles before personal relations.

As the son of a policeman, Chief Executive Donald Tsang Yam-kuen surely knows that leaders in society should set standards and not get away with lower ones than an average citizen.

Philip Bowring is a Hong Kong-based journalist and commentator