THERE are some basic conclusions that can be reached from the reaction of the Allied Group's board to the publication last Saturday of the report into the company by Nicholas Allen, the Inspector appointed by the Financial Secretary: they don't like it and they want the company's image to reflect current events, not past actions. So, the matter the directors have to consider most urgently is the future of Lee Ming Tee, as has Mr Lee himself. When the board meets, and it should be soon, they must decide what is in the best interests of the shareholders, as well as the company. It may be that the directors will consider Mr Lee's continuing role as non-executive chairman is so valuable to the company that it should continue. They may otherwise decide that the damage done to the company's reputation through the actions described in the report, and which took place under Mr Lee's stewardship, are so serious that his continuing presence and influence cannot continue. Whatever the decision the board reaches, its reasoning must be conveyed to the shareholders, and the public, in the fullest detail. A question of loyalty and the validity of the report will inevitably arise. After all, Mr Lee built up the company. He has had no criminal charges levelled against him, far less proved. The report, as made public, gives no indication of what, if any, laws or rules, may have been broken in the very complicated course of events it describes (although the fuller report which the Allied board will have received does contain the opinions ofthe inspector as to the legality of the actions). Its validity has been challenged by existing executive directors, who have spent a lot of money - belonging to the shareholders - fighting to prevent the report being published. So far the courts have not accepted the arguments that the way in which the investigation was conducted was unfair and prejudicial to the company. Now the directors have to decide whether a journey to the Privy Council in London would serve their purpose, and be money well spent. A resignation at this point would be seen by some as the driving of the thin edge of a very thick wedge into Hong Kong's corporate culture. It would be viewed as a victory for the forces of ever-heavier regulation and those who wish to see the corporate police state sweep away the entrepreneurial spirit which has made Hong Kong prosperous. They would no doubt agree with those who have been the subject of similar inspections in the United Kingdom - including the late Robert Maxwell - who condemned one or two-man investigations as form of Star Chamber. The difference is that Mr Allen's report, although obviously containing a great deal of his opinion, does not pass on a verdict to the general public. That may be the job of others. Mr Allen's job may be over, but that of the Commercial Crime Bureau, the Securities and Futures Commission and the Hong Kong Stock Exchange, is just beginning. They must decide whether there have been breaches of the law or listing requirements, whether markets were manipulated or fiduciary duties breached. Meanwhile, the life of the company goes on. ''Back to business'' was the phrase used in advertisements by Allied Group this week to underline that the past was past, times had changed, and the company had undertaken some fundamental reforms, both at board level, and below. If it is to be crystal clear that a line has been drawn between those events which took place between January 1, 1990 and August 14, 1992, which were the subject of the investigation, and the activities of the company now, then that line must be deep, and wide. Much has certainly been done to ensure that Allied now complies with the latest theories of corporate governance - independent directors, audit committees, checks and balances. Much of what is known about the transactions which took place came from the latest report and accounts. Heads have rolled without publicity, new professionals have been brought in to run the subsidiaries. But while the document hangs over the company, and if it pursues its challenge to the report, which is really being made on behalf of Mr Lee, and other former directors, uncertainty will remain. Some time soon, the directors of Allied, who now include some highly qualified non-executives, must decide what role Mr Lee Ming Tee should be playing in the company. If they decide to invite him, or any other named party, to step out of the boardroom, either permanently, or until the events which will follow the publication of the report have run their course, it would be understandable. Of the report itself, it must be said that if it assures players in the Hong Kong market that any suspicions of wrong-doing will be thoroughly investigated, it has done one job which will benefit the financial community. Like a gallows on the beach, it will have shown passing merchants that there are rules to be obeyed in this territory.
