Plan to limit number of directorships scrapped
The stock exchange will not proceed with a plan to limit the number of directorships any one person can hold, but will require companies to ensure that at least one third of its board members are independent by the end of 2012.
This was in line with a report carried in the South China Morning Post last month predicting the outcome of the exchange's largest corporate governance reform in six years.
In a consultation paper issued last December, Hong Kong Exchanges and Clearing asked the market if it should introduce a cap on directorships to ensure directors had enough time to perform their duty. China has a rule capping the number of directorships at five.
The exchange said it would not pursue this issue, 'given strong opposition' to such a cap, with respondents saying it was up to individuals to determine if they had enough time to perform their duties.
Respondents had told the HKEx that 'not imposing a limit may encourage a culture of professional directorships in Hong Kong, where more qualified and experienced individuals could build careers providing independent advice to board members'.
However, the exchange will go ahead with plans to raise the proportion of board seats held by independent directors to a third of all seats by the end of 2012, to improve checks on executive decision-making.
All listed companies must have at least three independent directors, but there is no set ratio. That lags behind Singapore, the United States and Australia, where a majority of board members must be independent. Britain requires at least half.
About 80 per cent of locally listed companies had boards that could meet the one-third proposal as of August last year. But the rest - about 300 companies, including blue chips such as Cathay Pacific Airways and Sun Hung Kai Properties - fell below the one-third threshold.
The exchange also amended directors' training. Instead of requiring all to have at least eight hours' training a year, it will now allow directors to decide on their training, which companies will then disclose in a corporate governance report.