MANY corporate directors wonder why there is any need for basic changes in the way they conduct their business. The answer is that many publicly listed companies do not appear to be run in a manner consistent with the interests of minority shareholders. Good corporate governance helps to ensure that, where possible, companies serve the interests of shareholders, staff, customers and society as a whole. Corporate governance provides checks and balances that discourage directors from running companies for their own benefit. Such safeguards are important for companies hoping to attract funds, particularly from overseas. Far from being able to manage without good corporate governance, Hong Kong particularly needs it because of the prominent role families play in many Hong Kong listed companies. In other major financial centres, shares are often broadly held, and minority shareholders are not only in a position to voice their concerns about the way companies are run, but to do something about it. Ultimately, directors whose actions are questionable may be removed. In Hong Kong, by contrast, the vast majority of companies are dominated by individual families. Such a situation invites abuses of the privileges a company derives from its limited liability and joint-stock status. In particular, publicly listed Hong Kong companies have been known to buy or sell assets to related family-owned businesses at prices that bear only a limited relationship to market rates. Also, directors have been known to award themselves remuneration packages that are more than a little generous. Anyone doubting the need for good corporate governance should bear in mind what happened at Mirror Group Newspapers, where the late proprietor, Robert Maxwell, was able to help himself to the company pension fund. A survey this week by Price Waterhouse indicated that Hong Kong executives recognise the need for change. As 1997 approaches, the temptation grows for families to do deals that benefit only them but not minority shareholders. The mechanisms to prevent this need to be in place, and be seen to be.
