Hong Kong-listed companies need greater board independence, AllianzGI says

The boards and audit committees of Hong Kong-listed companies should have greater independence, according to the head of environmental, social and governance research at Allianz Global Investors.

A key reason for the perceived non-independence is that many board directors in Hong Kong have ongoing business relationships with, or are affiliated with, the controlling shareholders, said Eugenia Unanyants-Jackson.

It is also very rare in Hong Kong to find completely independent audit committees with no conflict of interests reporting to the company’s independent directors and ensuring the integrity of financial statements to minority shareholders, she added.

“We want at least a third of the board to be of high quality, experienced, and unquestionably independent directors. The directors who sit on the audit committee also need to have very strong financial experience, especially in audit and accounting,” Unanyants-Jackson said.

Last year AllianzGI, which manages over US$598 billion in assets globally, voted in 7,961 shareholder meetings and on 83,488 proposals from both management and shareholders. The proportion it voted against at the meetings was only 6 per cent in the UK, according to AllianzGI’s latest proxy voting data. The level was sharply higher in Hong Kong, at 28 per cent, and in the US at 35 per cent, reflecting poorer corporate governance standards in those markets.

AllianzGI also voted against 31 per cent of all proposals to appoint a particular director in Hong Kong, the same proportion as in the US, but again well above the UK’s 7 per cent.

“The higher percentage of votes against resolutions in Hong Kong compared to other markets should be a wake-up call to start adapting to globally rising standards,” Unanyants-Jackson said.