Reputation of corporate award winner tarnished
Sun Hung Kai Properties may be a winner of corporate governance awards but the Independent Commission Against Corruption investigation into its top executives threatens to tarnish its image as one of Hong Kong's best run and most transparent companies.
Just two weeks ago, SHKP won a third consecutive Asian Corporate platinum award for its corporate governance from international magazine The Asset.
But analysts said the company's reputation has now taken a hit.
The arrests of former chief secretary Rafael Hui Si-yan and SHKP's co-chairmen, brothers Thomas Kwok Ping-kwong and his younger brother Raymond Kwok Ping-luen on suspicion of bribery 'will have a short-term negative impact on [the company's] shares', said Cusson Leung Kai-tong, an equity analyst at Credit Suisse.
Eric Yuen Chi-fung, head of research at brokers Guoco Capital, said the investigation had dampened the confidence of investors and they would hesitate to buy shares.
SHKP shares fell 1.51 per cent to HK$111.10 yesterday morning before trading was halted in the shares at the company's request, pending the release of an announcement. Trading in shares of two related firms, SmarTone Telecommunications and Sunevision, was also halted.
SHKP said in a statement late last night that it had asked that trading be resumed in its shares today. The company said it wished to clarify that the arrests 'have not affected and will not affect the normal business and operations of the group'.
Leung said: 'It is one of the best companies in Hong Kong and enjoys a public perception [of having] good corporate governance and high transparency but the issue will be a blow to its corporate image.'
However, he believes it will not affect day-to-day operations because it is a well-developed company.
But one analyst said the situation would affect company decisions on major investments such as land acquisitions, as well as staff morale. 'But I don't think it will affect their property sales and leasing sectors,' the analyst said.
Kenny Lee Yiu-sun, chief executive of First China Securities, said: 'The two Kwok brothers are the top managers and it is likely the incident will delay the company's big development projects.'
However, Ben Kwong Man-bun, chief operating officer of KGI Asia, said SHKP and the related firms had other managers to handle their corporate affairs.
As such, he did not think the companies' development would be affected by the investigation.
Edward Chow Kwong-fai, deputy chairman of the Business and Professionals Federation of Hong Kong said listed companies, civil servants and other public officials needed to be aware of standards of public governance.
'It is important for listed companies to prevent any conflict of interest when they deal with government officials. They need to prevent reputation risks at all costs,'' Chow said.
Kelvin Wong Tin-yau, chairman of the Hong Kong Institute of Directors, said companies should strengthen their internal controls. 'All listed companies should have good internal controls to prevent conflict of interest and to comply with anti-bribery laws,' Wong said.
Hong Kong Exchanges and Clearing declined to comment.