If Hong Kong were better governed, would there be any need for democracy?

Kelly Yang says people rallying for democracy in Hong Kong really want strong leadership, as has been demonstrated in the corporate world

PUBLISHED : Tuesday, 11 November, 2014, 12:26pm
UPDATED : Wednesday, 12 November, 2014, 4:33am

Two blocks away from the protests for "one person, one vote", the Hong Kong stock exchange is quietly mulling over whether to abandon its "one shareholder, one vote" policy. Ironically, early this year, it was the exchange's insistence on democratic governance that lost Hong Kong the biggest IPO in history - the US$25 billion Alibaba listing - to New York.

HKEx's "one share, one vote" policy serves to safeguard shareholders' rights against entrenching power to a minority, in much the same way "one person, one vote" protects citizens. Yet a growing number of companies, including Alibaba, Google and Facebook, are eschewing this democratic model in favour of dual-class shares, where some shares are weighted more heavily than others.

Dual-class shares, allowed on the New York Stock Exchange but not yet in Hong Kong, allow founders and vetted executives to keep control while still getting the public's money. This trend raises the question: Is democracy becoming a thing of the past?

Alibaba seems to think so. A group of 27 "partners" of the Chinese online commerce company has retained the exclusive right to nominate a majority of its board of directors even after it became a public company. Founder Jack Ma argues that in order for a company to "survive the long journey", it needed to be able to withstand the pressures of short-term gains that shareholders demand. To do that, it needed control.

Last month, Chief Executive Leung Chun-ying infamously tried to use similar logic in media interviews to defend the proposed 2017 nomination procedure for the chief executive. Unfortunately, the result of his speech was no soaring IPO.

As Leung's approval ratings plummet, companies like Alibaba continue to attract shareholders who happily trade their cash for virtually no say in the company. Why? And if it's possible for corporations to flourish in a structure in which shares and money are not king, is it then possible for a city to thrive when its people are not king?

Of course, there are glaring differences between companies and countries. Moreover, because governments affect people's fundamental rights, when something goes wrong, there's a lot more to lose. Currently in Hong Kong, there's a massive wealth gap, limited access to affordable housing and an education system that facilitates little upward mobility. That's a lot that needs to change.

However, if the success of tech IPOs tells us anything, it's that democracy is not the only way to bring about change. Non-democratic systems of governance can also bring lasting, favourable results.

Ultimately, what all successful companies and countries need - democratic or not - is strong leadership. That's why the Hong Kong people are protesting for democracy while the HKEx is thinking about scrapping it. The stock exchange has seen exceptional leaders who can deliver results to shareholders without democracy. The Hong Kong people, on the other hand, clearly haven't.

Kelly Yang is the founder of The Kelly Yang Project, an after-school programme for children in Hong Kong. She is a graduate of the University of California, Berkeley, and Harvard Law School. kelly@kellyyang.edu.hk