Two ways to improve standards
Hong Kong has in recent years made great strides in strengthening corporate governance. This includes the stock exchange's Code of Corporate Governance for listed companies, launched in 2004, and recent efforts to rewrite the city's Companies Ordinance, due to be introduced into the Legislative Council before the end of the year.
However, there is still much that needs to be done to improve standards, said April Chan, president of the Corporate Secretaries International Association. The association was launched in March as the first global organisation to represent the corporate secretarial profession and has more than 70,000 members.
Chan, who serves as company secretary for local power company CLP, said that while Hong Kong required companies listed on the stock exchange to disclose the remuneration of their individual board members by name, there was no such requirement for senior managers. Instead, the stock exchange only recommends that companies disclose the remuneration of senior managers on an individual and named basis as a best practice.
'Senior management's remuneration should be on an individual and named basis,' she said.
'Being a senior manager is no different from being a director of a company in that they are paid with what is in essence shareholders' money, and therefore shareholders should have a right to know how much they are being paid.'
Another issue that Hong Kong needs to address if it wants to improve its corporate governance is limiting the number of board directorships that executives are allowed to sit on at any given time.
Unlike in Britain, where directors are not allowed to hold directorships in more than five public companies, in Hong Kong there are no such limits. Some executives have been known to hold as many as 15 or more board directorships concurrently, sometimes in addition to holding executive appointments.
'The question is whether someone like that can dedicate enough time to really understanding a company's affairs and advise the board on which they serve accordingly. I think Hong Kong needs to look into this in terms of getting quality time from directors by limiting the number of directorships that they can hold at any one time,' she said.
However, it was difficult to compare corporate governance standards in Hong Kong with the rest of the world. The city's strengths lie in the freedom of its legal system, its professional and informed regulators, and a government that is supportive of initiatives that help improve corporate governance.
On the downside, a majority of listed companies are either family or state-owned. 'To a certain extent, if the ownership of a company is vested in one small group of people, unless that group has its interests aligned with the rest of the stakeholders, and believes truly in the importance of good corporate governance, then it will be difficult to introduce universal corporate governance principles and practices in that organisation.'
Chan said the association was putting together a company secretary's toolkit to facilitate a high standard of company secretarial practices. This will be in addition to a research report entitled '20 Practical Steps to Better Corporate Governance' that the association published during its launch in March.
She said that company secretaries played a vital role in enhancing corporate governance. 'It is more than a series of codes or documents. It is a company's culture and also the commitment of all stakeholders to a set of ethical practices. As company secretaries we need to make sure that, in a company's conduct, we remind the board and senior management that there is a set of values that they must adhere to, and to implement these values across the entire business in a transparent and ethical way, so that the business and its managers are accountable for what they do,' she said.