Firm bosses still pulling double duty
More than a quarter of locally listed companies still have the same person functioning both as chairman and chief executive in violation of a code of corporate governance laid down by the Hong Kong stock exchange.
A survey by accounting firm BDO shows 26 per cent of the city's 232 largest listed companies have not complied with the code implemented by the Hong Kong Exchanges and Clearing in 2005. Companies must follow the rules or, if they do not comply, explain in their annual reports why they failed to meet the standard of good practice.
BDO risk advisory chief Patrick Rozario said many companies have said it is not possible for them to comply with the code as most chairmen are also founders or the major shareholders in their company and therefore know the business best and are best suited it run it as chief executive.
Rozario said more companies may split the roles as their original founders retire.
'Having two people for the two roles adds an element of checks and balances as the chief executive handles the daily operations and the chairman assesses the chief executive's work,' Rozario said.
It is mandatory in Australia, Britain and the United States for all listed companies to segregate the roles. Singapore, like Hong Kong, gives companies an alternative if they do not meet a requirement to split the roles. The mainland has no such requirements.
Kelvin Wong Tin-yau, the chairman of Hong Kong Institute of Directors, said many US- and UK-listed companies do not have single, dominate shareholders, so they can easily find different people to serve.
'We should note that in Hong Kong and in Asia in general, there are many family-owned businesses and the top management are also the major shareholders,' Wong said. 'This is why many companies have not yet split up the roles.'
Rozario said he would like to see more companies voluntarily report quarterly. At present, companies listed on the Hong Kong main board need only report twice a year while the Growth Enterprise Market-listed companies in Hong Kong report results every three months.
'From the shareholders' point of view, it's good corporate governance practice for companies to update their information more frequently as it enhances transparency,' he said.