Merged exchange exemplifies Charles Lee Yeh-kwong working for the community

Charles Lee Yeh-kwong is not an easy man to pin down. The 65-year-old Executive Councillor has so many roles that he defies easy stereotypes. Playing various roles including politician, solicitor, administrator, reformer, academic, and charity worker, Mr Lee is perhaps best seen as an all-round pillar of the establishment, as well as one of its key power brokers. 'I think you could call me a full-time public worker,' he suggests with a smile, pointing out that his Executive Council post is his only paid job. The role Mr Lee has played in developing Hong Kong's financial markets over the past three decades is probably regarded as his defining contribution to the SAR. As Hong Kong's merged stock and futures exchange and associated clearing houses prepare to celebrate its first anniversary tomorrow, Mr Lee has cause for satisfaction. Brokers credit the first chairman of Hong Kong Exchanges and Clearing (HKEx) with being a prime mover in pushing through the reforms, which initially were resisted fiercely by many in the brokerage community. The ultimate success, which has laid the foundation for the markets' next phase of growth and development, is testament to the influence and respect Mr Lee commands on all sides. Few people have played as big a role as he in making Hong Kong's markets what they are today. Once known as Hong Kong's 'king of directors', he encouraged many of the territory's biggest companies to go public at a time when most favoured bank loans over equity. As stock exchange chairman in 1993, he took the landmark step of bringing the first mainland enterprises to list in Hong Kong. And as chairman of the Mandatory Provident Fund Schemes Authority (MPFA), he oversaw the historic introduction of the SAR's compulsory retirement scheme last December. Like Hong Kong itself, Mr Lee has come a long way. One of four children, he was born in Shanghai in 1936 during the Sino-Japanese war, and moved to Hong Kong with his family in 1949. Mr Lee says he remembers little of those early years, but notes his family moved back to the territory for business reasons rather than to flee the communists. His father, who was in the shipping business, had been brought up in Hong Kong. Mr Lee attended Wah Yan College, then learned accounting in Hong Kong before going on to study law in Britain. Returning with a master's in law, he worked from 1968 to 1973 as secretary to the Company Law Revision Committee, which led the way to the enactment of the Securities Ordinance and substantial amendments to the Companies Ordinance which are still in use today. As a corporate legal adviser in the 1970s and 1980s, Mr Lee encouraged many enterprises to go public so as to reduce their reliance on bank loans. The companies - including Cheung Kong (Holdings), Sun Hung Kai Properties, Henderson Land and Hopewell Holdings - became some of Hong Kong's biggest blue chips. 'If you borrow from the banks, you have to repay the money plus the interest,' Mr Lee said. 'If you tap funds from the stock market, you do not need to repay the money. This allows companies to have more capital to expand'. However, going public imposes obligations on companies to disclose information and protect the interests of small shareholders. Such corporate governance concepts were relatively new to Hong Kong in the 1970s and Mr Lee's warnings about the duties of listed companies worried them. As a result, many asked Mr Lee to sit on their boards and 'hold their hands' to guide them through the maze of listing rules and laws. He served on the boards of more than 20 blue chips, more than any other Hong Kong director. Mr Lee resigned his directorships when he was appointed an Executive Councillor in 1997 to avoid conflicts of interest - allegations of which had dogged him earlier in his role as chairman of the stock exchange. By the time Mr Lee became exchange chairman in 1992, almost all Hong Kong's biggest players had gone public. 'At that time, I thought the exchange needed a new focus. We needed more large companies outside Hong Kong to list here,' he said. Mr Lee set his sights on the mainland, convincing then-vice-premier Zhu Rongji that Chinese enterprises should be allowed to raise funds in Hong Kong. 'As Hong Kong is an international centre, the listing of Chinese enterprises in Hong Kong will force them to upgrade their corporate governance and management style in line with international standards,' he said. The first mainland enterprise to list in Hong Kong, Tsingtao Brewery, made its debut in July 1993. Mr Lee explained that he had rejected suggestions for a separate China board with lower listing requirements. 'I insisted Chinese companies should follow the same tough rules as Hong Kong companies, to ensure Chinese companies would match the international standards adopted in Hong Kong.' Mainland firms now account for more than 28 per cent of Hong Kong's market capitalisation. Mr Lee's success in pioneering the listing of mainland enterprises in Hong Kong was believed to be the reason for the Government choosing him to lead reforms of the SAR's pensions and securities markets. In 1998, he set up the MPFA, meeting all candidates for the 10 most senior executive posts at the new pension regulator. The following year, he was handed another, and more challenging task: persuading Hong Kong's brokers to accept the demutualisation and merger of the stock and futures exchanges with the three clearing houses into the new, publicly listed HKEx. It was a tall order, to win over a suspicious local brokerage community accustomed to regarding the exchange as their private club. While the lucrative financial terms offered by the Government ultimately won brokers' support, Mr Lee's status as an elder statesman of the financial community may have played a key role in breaking down initial hostility. 'At the beginning, many brokers were opposed to the merger plan,' he said. Mr Lee met almost all Hong Kong's 500 stock brokers and 130 futures brokers to listen to their concerns and to explain the merits of the reform. 'You need to be a good listener before you can find a solution,' he said. The key concern for brokers was that the shares in HKEx they would receive in exchange for their exchange seats might become worthless. Mr Lee therefore suggested a cash alternative. Few brokers opted for cash. HKEx shares rose from their issue price of HK$3.88 to a high of HK$19, bringing a potential windfall of HK$15 million to stock brokers and HK$26 million to futures brokers who sold at the top. Mr Lee was also behind the two-year ban on new membership in HKEx, adopted to assuage brokers' fears of a flood of foreign competition. As a result, the reforms were passed by 98 per cent of stock brokers and 100 per cent of futures brokers. Mr Lee said the brokers could use the windfall from HKEx's listing to move into online trading, now developing rapidly in Hong Kong. 'Brokers can either use the windfall to improve their technology, or they can take the money and leave the industry,' he said. 'The revolution of Internet trading was coming, whether or not the exchanges merged. But at least the reforms have given brokers the money to prepare for the challenge, or retire.' He believes the Hong Kong stock market will face competition from the Shanghai and Shenzhen exchanges once China enters the World Trade Organisation and the yuan becomes fully convertible. 'The next focus of HKEx is to upgrade its overall regulatory standards and trading facilities to prepare for the challenge ahead,' he said. As chairman of both the MPFA and HKEx, Mr Lee starts work before 8 am and returns home after dinner every night. Both posts, which between them take up more than 90 per cent of his time, are unpaid. Besides these, Mr Lee is chairman of the council of the Open University of Hong Kong, a member of the court of the Hong Kong Polytechnic University and a member of the council of the Hong Kong University of Science and Technology. He is also a charity worker, having served as the executive committee chairman of the Community Chest in 1997 and 1998, and chairman of the campaign committee of the Community Chest from 1995 to 1997. Mr Lee said his father had always encouraged him and his siblings to do voluntary work. 'I think this is a merit of Hong Kong that there are many people willing to spend their time to do voluntary work for the community,' he said. 'Many people consider Hong Kong people are money oriented. But actually this is not the case.' Many professionals sat on the Government's hundreds of advisory bodies, he pointed out. The ruling bodies of HKEx, the MPFA and other charity associations were also filled with volunteers. 'The social welfare system in Hong Kong is not perfect, but volunteers have filled the gap in providing help to those in need. I hope the younger generation will continue this tradition,' he said. Biography Charles Lee Yeh-kwong was born in Shanghai in 1936 during the Sino-Japanese war. He was brought up and educated in Hong Kong after his family moved from Shanghai in 1949. After graduating from the University of London with a master's degree in law, Mr Lee became a solicitor qualified in Hong Kong, England and Wales. He is one of the founders of the Hong Kong solicitors firm Woo, Kwan, Lee & Lo. Mr Lee was chairman of the Stock Exchange of Hong Kong from 1992 to 1994, has been an Executive Councillor since 1997, and has been chairman of the Mandatory Provident Fund Schemes Authority since 1998. He has been chairman of Hong Kong Exchanges and Clearing since 1999. Mr Lee was made an Officer of the Most Excellent Order of the British Empire in 1994. He was awarded the Gold Bauhinia Star last year. Mr Lee is married with a daughter and son and has six grandchildren. His hobbies are boating and scuba diving.