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Enoch Yiu

Banks and utility giants among the best performers in governance practices, says university survey

Large companies have taken all top 10  positions in a survey of corporate governance standards  undertaken by the City University of Hong Kong.

Banks and utility giants were among the best performers in corporate governance practices, the study found.

HSBC Holdings, Bank of East Asia, Hong Kong Exchanges and Clearing, CLP Holdings, MTR Corp and China Mobile (HK) all made the top 10.

The other companies included were Asia Satellite Telecommunications Holdings, Hongkong and Shanghai Hotels,  Linmark Group and VTech Holdings.

The study, sponsored by the Hong Kong Institute of Directors, its chairman Herbert Hui Ho-ming  and Tai Fook Group's managing director Peter Wong, rated 168 listed companies on corporate governance.

City University ranked the companies after reviewing their 2002 annual reports and other publicly available information on constituents of the Hang Seng Index as well as red chips, mid-caps and H shares.

Mr Hui said that although large companies dominated the top positions, many smaller companies had shown marked improvement in corporate governance standards in the past few years.

He said a lack of resources had restricted some small firms from matching the best practices of blue chips.

'It is therefore for the regulators to remember that any corporate governance reforms must be affordable for the small and medium-sized companies,' Mr Hui said.

The survey did not release the top 10 in order but said the best performer scored 76.34  while the average was 48.32.  The worst among the 168 companies scored only 32.86.

Hong Kong companies performed well in disclosure and equitable treatment of shareholders, the survey found.

However, they performed poorly in terms of shareholders' rights and board responsibilities.

Hang Seng Index constituents performed the best, with an average score of 52,  followed by mid-caps and red chips which both scored an average of 50.  H shares ranked the worst, scoring an average 44.

City University economics and finance professor Stephen Cheung Yan-leung, who oversaw the study,  said mainland companies performed poorly because they were new to many  governance concepts.

Professor Cheung said that many of the mainland companies had connected transactions with parent groups or sister companies that some had failed to adequately explain.

He also said the survey showed a strong correlation between the strength and performance of a share price and the quality of corporate governance.

'Investors are willing to pay a premium to invest into companies with higher corporate governance standards,' Professor Cheung stated.

Mr Hui concluded by saying: 'It is critical for companies to develop a track record of good corporate governance if they wish to sustain the confidence of customers, suppliers, shareholders and investors.'



Big firms given top scores in governance report