One window on a company's corporate governance practices, particularly on transparency issues, is its annual report.

'You sort of know or sense whether a company is being very open with its disclosures through annual reports and also through its interim or quarterly reports,' said Howard Gorges, vice-chairman of South China Brokerage.

The combination of new regulatory requirements related to corporate governance and efforts by companies to introduce more clarity to their annual reports was making a difference, he said.

For companies, the benefits of corporate governance are the positive impact it can have on their share price and reputation, while the lack of it is increasingly associated with negative outcomes.

'Studies have shown that shareholders of a company have a higher comfort level if they feel they know everything they should know about the company,' Mr Gorges said.

'If the company has a good reputation for corporate governance, it tends to put a higher price-earnings multiple on the share price.'

At the opposite end of the spectrum, recent cases - including Moulin Global Eyecare Holdings and Agricultural Bank of China - have put the consequences of weak corporate governance practices in the spotlight.

Mr Gorges said the Agricultural Bank of China, one of the mainland's big four state-owned banks, had become virtually 'unlistable' after auditors exposed 51.69 billion yuan in operational irregularities and accounting problems involving 1.26 billion yuan, which has resulted so far in disciplinary action being taken against 95 of its employees.

'The [other three big mainland banks] are all listed or in the process of being listed, but the Agricultural Bank of China will have to put its shop in much better order before that can even be considered,' Mr Gorges said.

While Agricultural Bank of China was found out before any initial public offering got off the ground, Moulin caught its investors by surprise last year when it quickly unravelled in one of Hong Kong's biggest corporate collapses. The company, which claimed to be the world's third-largest eyewear maker and was ranked one of the 300 best small firms in the world by Forbes Global in 1998, had expanded rapidly and attracted investment from respected institutions before everything went sour. Moulin went bankrupt in June last year, owing almost $3.6 billion and is now undergoing liquidation.

'Just about every aspect of the Moulin case reflects poor corporate governance,' said Jamie Allen, secretary-general of the Asian Corporate Governance Association (ACGA).

'There were clearly disclosure issues, issues of how investments were allocated, and issues of general integrity of management.'

In CLSA's CG Watch 2005, compiled in conjunction with ACGA, Hong Kong ranked a close second behind Singapore as the top corporate governance locale in Asia. The city was cited for its 'well-governed mid-cap companies, higher pay for independent non-executive directors (INEDs) and voluntary voting by poll among large-cap companies'.

The report also gave Hong Kong high marks for accounting standards, its regulatory and political environment with regard to corporate governance and shareholder value creation.

But Mr Allen did not think this meant that either Singapore or Hong Kong measured up globally. 'Being first in Asia isn't anything to write home about,' he said, adding that Hong Kong and Singapore needed to compare themselves 'against the United States, Britain and Australia, not against India and Malaysia'.

He and Mr Gorges give credit to the Hong Kong stock exchange for its efforts to introduce a multi-tiered approach to corporate governance. The first tier consists of new listing requirements, with many of the rule changes applying from January 1 last year.

The next is a voluntary Code on Corporate Governance Practices, which features 'comply or explain' provisions. The final tier is recommended best practices.

In the first tier are requirements that companies have, for example, an audit committee and a minimum of three INEDs serving on their board.

Separating the positions of chairman and chief executive officer falls under the Code on Corporate Governance Practices. Having INEDs comprise one-third of a company's board is a recommended best practice.

Kevin Lau, who serves as an INED on a number of company boards and is a council member of the Association of Chartered Certified Accountants, believes firms are taking corporate governance more seriously.

'From my own experience, companies feel there is an advantage in doing this,' Mr Lau said. 'Hong Kong is definitely making progress on the issue.'

The calibre of INEDs, whose qualifications once might have been based on being a golfing friend to the chairman, has also improved as their responsibilities have increased. 'They are much more serious about their role,' Mr Lau said.

Increases in pay were also helping to attract more qualified people, he said.

According to a recent survey by Korn/Ferry International, the pay of INEDs in Hong Kong has doubled from what it was five years ago, with average compensation last year rising to $160,000.

Mr Gorges said firms were slowly evolving in their attitude towards corporate governance. 'First they did it because they had to and now more are doing it because it's right and because it's in their own interest,' he said.