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Shirley Yam

The curtains on the latest ATV management soap opera are finally down. Heads have been chopped. Names have been called. But one question remains unanswered.
Why is the station's newly appointed executive chairman, Linus Cheung, still sitting on the board of Hong Kong Resort as an independent director?
After the latest episode, Mr Cheung's closeness to the Cha family, in particular the eldest son, Payson Cha, who controls both the station and the property firm, is beyond doubt.
The  Chas ventured into the underdog station last April. Seeing their HK$780 million cash injection vanish in a year, they've brought in the ex-Hong Kong Telecom head in a desperate attempt to plug the black hole. Sources said they want someone trustworthy to steer the boat before pumping in another HK$300 million.
Mr Cheung has lost his independence on HKR's board because he is now a paid  employee of ATV. His new position as an executive chairman is a clear contradiction to the definition of independence stated in the  listing rules.
Rule 3.13(7) stipulates that the independence of a director will be questioned if he or she is an executive or director of the listed issuer, of its holding company, or any of their respective subsidiaries.
The logic is simple. How can one be independent from the controlling shareholder if he earns a salary from the latter? The Cha family controls 50 per cent and 58.33 per cent of  Hong Kong Resort and ATV respectively.
The  listing rules also say that when a director fails to meet the guidelines, the listed company must demonstrate to the satisfaction of the exchange that the director is independent. It must also disclose the reason why such person is considered to be independent.
More than two weeks since the appointment, we have not heard anything from the stock exchange, Hong Kong Resort or Mr Cheung regarding the latter's independence.
Perhaps we should not be too harsh on Mr Cheung. He's busy cleaning up the mess left by the bickering with  Ricky Wong  Wai-kay, the ATV chief executive  who left after 12 days in the job after making some politically sensitive and sexist remarks.
Let's not forget Mr Cheung came out and spoke favourably for  Richard Li Tzar-kai in 2000 when Mr Li was bidding for the then Hong Kong Telecom.  Mr Cheung, as the chief executive, was supposed to remain independent before the board took a position. Mr Li eventually succeeded. Official records later revealed that Mr Cheung had been given a  golden parachute worth millions.
There is not much we can ask of him.  He's living in a business world where the independence and the job of independent non-executive directors have rarely been taken seriously by the directors themselves or the firms, especially those controlled by families. Firms see the appointments as a gesture to comply with the  listing rules that require listed companies to have at least three independent directors.
Directors see the appointment as a way to foster relationships, to protect their tightly knit world or to earn decent stipends, ranging from HK$120,000 to HK$1.5 million a year. Cross-board seat holdings as independent director  are not uncommon.
Seldom have we seen independent directors holding the management or controlling shareholders accountable in the interest of the company as a whole, not even when there is a very compelling case.
Two recent examples are the Citic Pacific and Bank of East Asia scandals, which have attracted much public discussion and criticism.
In the former case, minority shareholders were left in the dark about how the firm lost HK$15 billion by betting on the Australian dollar. Both  the chairman and chief executive  claim no knowledge  or responsibility for the bet.
The firm's four independent directors, all of whom were appointed  in the early 90s, have remained silent. They have done no independent investigation into the cause of the loss.
Yet yesterday, they recommended that minority shareholders accept a rescue package that will seriously dilute their holdings but includes no management restructuring.
In BEA's case, a trader is said to have hidden wrong bets from management, which cost the bank HK$200 million. The problem was discovered only after a higher half-year profit was reported to the shareholders. Management said it was an isolated incident and that internal controls are fine.
Its nine independent directors, many of whom are household names in town, have also been silent on this. They formed no committee to find out what went wrong with the system and recommend ways to fix it, although BEA did hire its own auditors to look into the matter.
None of these 13 directors has exhibited any will to act in the interest of minority shareholders but have gone along with the controlling shareholders, who are very often their friends or associates. Given the norm, how can we expect Mr Cheung and the HKR to act differently and take the independence of an independent director seriously?



Why is Linus Cheung still an  HKR independent director?