Values have changed in Asia but domestic reforms are not taking place fast enough Hong Kong's corporate governance reforms have been too slow, according to one fund manager. 'Hong Kong - which has probably one of the best rule of law histories - is still too slow and complacent about trying to adopt the new standards of corporate governance,' said State Street Global Advisers Asia chief executive Vincent Duhamel. 'Standards have changed now in Asia and in the world and you need to address that very, very quickly,' he said at a conference organised by the Asian Corporate Governance Association. In April, then financial secretary Antony Leung Kam-chung reversed a decision to pass the stock exchange's regulatory functions to the Securities and Futures Commission. A government-appointed group had recommended the SFC take over all securities regulation. After Mr Leung's climbdown, the group's reform proposals were put out for public consultation. State Street rose to prominence in Hong Kong after its appointment to manage the Tracker Fund, through which the government sold stock acquired during its controversial market intervention in August 1998. To increase transparency, quarterly reporting should be introduced for firms listed on the main board, Mr Duhamel said. Hong Kong firms also report their results slowly compared with other developed markets. Listing rules require firms to report annual results within four months of the year end and interim accounts within three months. 'I can't believe that Citibank, which has operations around the world, ... can produce their quarterly earnings in 16 days and that a small company that produces plastic whatever cannot produce them in 60 days,' Mr Duhamel said. Such slow reporting was 'unacceptable', he said. Corporate governance standards have improved across Asia in recent years but Mr Duhamel said this may not last if the market recovery continues. 'We are seeing effective and real changes in corporate governance in Asia. The question is - how long are those changes going to stay while markets are becoming more attractive?' Some observers believe that when markets are weak, companies are more likely to improve corporate governance to attract investors, thus supporting their share prices. Corporate governance will continue to improve if more fund managers buy into Asia and take active roles in their investments. 'The current challenge in Asia is to develop a strong investor base in tandem with the economic growth of our region,' said Asian Development Bank vice-president Jin Liqun, formerly a deputy finance minister in China. According to Mr Jin, institutional shareholders have helped improve corporate governance in the United States where they account for more than 60 per cent of market capitalisation. Institutional investors in China hold less than 10 per cent of the market. However, conference speakers warned regulations and practices could not be copied from developed markets due to the larger economic role of Asian governments. 'Innovation is good but imitation has its dangers so we must be careful about learning the lessons from American examples,' said Ko-Yung Tung, senior partner with law firm O'Melveny & Myers in New York. When buying into an Asian firm, institutional investors can agree certain conditions with management to better protect their interests. Such an approach may be better than public disputes later on. 'We try to rely on more subtle shareholder activism - I guess what I call preventive measures - measures that basically try to align interests for the long term,' said Private Equity (Thailand) managing director Pote Videt. 'Every Asian businessman ... wants to own a five-star hotel. We just want to make sure that whatever we invest in does not end up going into a five-star hotel business,' Mr Videt said.