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Enoch Yiu

Pacific Century CyberWorks, China Mobile, Hutchison Whampoa, and Citic Pacific Hong Kong are among the local stock market's big caps with the lowest corporate-governance standards, according to a CLSA report.

The report, exclusively obtained by Business Post,  ranked HSBC, Li & Fung, and CLP Holdings as having the highest corporate-governance standards.

In the report, CLSA analysts gave their assessments of 495 companies in 25 emerging markets in Asia, Latin America and Eastern Europe during a six-week period to March 31.

They focused on 57 issues in seven categories - management discipline, transparency, independence, accountability, responsibility, fairness and social responsibility.

Companies were scored from zero to 100 per cent, with higher percentages indicating higher levels of corporate governance.

Larger companies generally had better scores.

The top 10 per cent of the largest firms rated an average of 71.8 per cent higher than the average of 55.9 per cent for all companies reviewed.

CyberWorks got 40.6 per cent, giving it the lowest corporate-governance standards among all 38 Hong Kong companies under review.

It was given zero for accountability. It ranked 96th among the 100 largest companies in the report as 'poor disclosure, confused strategy and ongoing disbelief in all but the fixed-line valuations will keep the stock under pressure'.

The report suggested CyberWorks could improve its corporate-governance standards by clearing Cable & Wireless' sell-down uncertainties.

It also suggested increased access for analysts to senior management and increased transparency in its investment decisions.

A CyberWorks official yesterday declined to comment on the report.

Other big local players that received a low corporate-governance score included China Unicom (41.5 per cent), Hutchison (42.7), Yue Yuen Industrial (Holdings)(43.4), Citic Pacific Hong Kong (43.6), and China Mobile (45.3).

Hutchison Whampoa's sale of a small satellite-services company to CyberWorks in return for shares had raised concern about the relationship between tycoon Li Ka-shing's flagship Hutchison and son Richard Li Tzar-kai's company.

The report said China Mobile suffered because Chinese authorities regarded shareholders as more important than customers.

HSBC, Li & Fung, and CLP  took the top three places for corporate governance in Hong Kong and also among the top 10 companies in the review.

Banking giant HSBC was No 1 in the report with 93.5 per cent. It received full marks for independence of directors, accountability and social awareness. India-based company Infosys came in second at 93.3 per cent, followed by Singapore Airlines with 85.7 per cent. Hong Kong's Li & Fung, at 84.1 per cent, ranked fifth overall and second among local companies.

Power company CLP's 82 per cent ranked it third best in Hong Kong and eighth overall.

The report said corporate governance had close links with business performance.

'Corporate governance is one way to pick up the companies with good management while good management could deliver good results,' said Amar Gill, author of the report and head of research for Malaysia of CLSA.

Among the 100 largest firms under review, the total average return in the past five years was 388 per cent, while the top quarter averaged 930 per cent.

Among the 38 Hong Kong companies under review, the average return on equities last year was 22.8 per cent, while the top quarter was 51.9 per cent and the bottom quarter 17.2 per cent.

Among all markets, Hong Kong ranked second best - lower than Singapore but better than Chile. Taiwan was eighth and China 19th - higher than the Philippines but below Malaysia.

The report showed key corporate-governance problems in Hong Kong.

Mr Gill said this might be a result of many local companies being family-owned and the lack of the quarterly reporting requirement.

Graphic: heroesgbz



CyberWorks among lowest in review and given zero for accountability as HSBC, Li & Fung and CLP come up roses