ERMANNO Pascutto might have to learn that every man in Hong Kong regards himself as a natural driver, lover . . . and company director. His recent suggestion that Hong Kong business people should take an examination before being allowed a directorship of a public company is already running into opposition. Should it be officially promulgated, whether as part of his forthcoming revision on the Companies Ordinance or not, an outcry is inevitable. Even those who are taking a harder line on corporate governance and the responsibilities of directors believe this is a layer of bureaucracy that the territory can do without, despite the steady stream of shocking revelations of misconduct, abuses of boardroom power and hidden murky pasts. 'Everyone I have spoken to reckons it's a daft idea,' said one executive closely linked to listing procedures in the territory. There was some speculation Mr Pascutto was not being entirely serious, a view the former executive director of the Securities and Futures Commission (SFC) and now a government consultant is quick to correct. 'We have developed for our listing rules concepts of fitness and properness for directors. They have to have character, experience and integrity to act as a director; they have to have a standard of competence. 'As far as I am aware at this stage, we haven't proposed any specific minimum, any educational requirement for directors. 'Why don't we consider the concept of requiring that directors either have a minimum number of years where they have demonstrated their capability to act as a director, or that they have been acting as a director of a listed company for a specific number of years, or either through education or other qualifications that they have a knowledge of duties and responsibilities of directors and the duties and responsibilities of a listed company.' Starting a process that will lead to directors sweating it out in an examination room is not necessarily the aim, which may reassure existing directors nervous at the thought of suddenly being declared unfit to enter the boardroom. 'I wasn't suggesting that you needed to have a compulsory exam where you had to get 90 per cent in terms of comprehension. A starting point would be at least requiring attention to be given. Who knows, at some stage, you might impose examination requirements.' There is no official stock exchange view on the principle of a director's driving test, although privately Herbert Hui Ho-ming, head of the listing division, thinks it would require a very hard sell. However, he does not rule out the possibility that courses could be introduced to explain to directors what their duties were. 'It is down to having a course which can be done regularly, which can instil into people the concept of doing right by shareholder-corporate governance effectively applied. It's not an exam; it's merely passing the message about correct action by directors,' said Mr Hui. Mr Pascutto sees the need for a course that will remind directors of companies about to be listed what the rules of conduct are. 'It can be a very basic course on directors' responsibilities, which can either be sponsored by the stock exchange or can be run by schools and universities in Hong Kong. It can run over a series of half-days, or in the evenings,' he said. He said there was a real gap in the knowledge of director's duties in Hong Kong. Companies were run by those who regarded themselves as skilled in their own field, rather than as company directors. Asked to describe their job, they would say they were property developers, engineers, import-export traders. 'There are people who have run manufacturing ventures who don't have the slightest concept of what it means to be a director. 'Interview some new directors of companies listed in Hong Kong in the past few years and you will find that few of them have any comprehension of their responsibilities. They are relying entirely on their advisers,' said Mr Pascutto, who did not necessarily think all advisers were giving the right advice. 'If you ask a director how well a merchant banker has educated him in his responsibility, he says: 'They told me I could get the money.' 'You really have to have a minimum of comprehension, otherwise you don't know when to turn to the advisers.' To Mr Pascutto, the idea of more formal requirements for directors, over and above their professional qualifications, reflects a trend that is already established in other fields of finance. The securities industry has gone through the same process. In the 1970s and 1980s, there were no requirements; with the arrival of the SFC there were much more defined requirements, and now the SFC is starting to require completion of industry courses on securities markets - and that is standard in North America. 'I support the whole concept of fitness for brokers, but at end of the day they probably have control over smaller amounts of money than directors.' Critics of the concept of examinations for directors fear it will do nothing to really improve corporate governance but can give the impression that something really is being done. John Brewer, chief executive of the Hong Kong Institute of Chartered Secretaries, has said there is unlikely to be much satisfaction over governance issues by relying on tick lists or a multiple choice examination paper. If he sees a gap, then it is about getting directors to listen and heed the advice of the professionals. Mr Pascutto does not regard a director's test as a panacea for the many problems facing companies and their investors - especially the regular ignoring, or abusing, of minority shareholders. 'This doesn't solve the problem. There is no one single step which will solve the problem,' he said. 'We have done a lot to improve standards in the past few years, but to some extent we have compliance with form rather than substance. 'Now we must look at improving compliance with the substance of the rules. 'We have enacted all the new obligations for listed companies, but a company is a legal fiction. It can only act through its officers and directors, and if they don't understand the rules, I would have thought the first priority would be education.'