THE Hong Kong way of running companies, with an inner family circle dominating the share register and the boardroom, is under challenge.
Under existing law, companies have to offer only 25 per cent of their shares to the public, but a proposal voiced last week by the Institute of Company Secretaries to raise the public float to a possible 45 per cent could undermine this fundamental tenet.
Families dominate Hong Kong's corporate scene. The typical Hong Kong company is run, owned and controlled by families. Companies trust family members and family members alone. Transgressions are not tolerated. Disloyalty is punished.
Dr Brian Wallace Semkow, an associate professor in the Department of Accounting at the Hong Kong University of Science and Technology, examined the classic structure of a Chinese-controlled company and summarised the inner circle in three words - owner, blood, marriage.
The stock market is a family-run affair. Li Ka-shing and family, owners of Cheung Kong and Hutchison Whampoa and Hongkong Electric, control 11.8 per cent of the market. The Keswick family, which runs the Jardines quiver of companies, controls 10.7 per cent.
The Swire family accounts for 8 per cent, the Kadoories 4.6 per cent, Lee Shau-kee nearly 4 per cent. The list goes on. In total, the 15 strongest families control 55.88 per cent of the market.
This trend continues in second-line and third-line stocks. Open up a directory of Hong Kong-listed companies and the names of the board members are revelatory.