While Hong Kong companies may pay lip service to the importance of independent non-executive directors representing the views of minority shareholders, it is often a different story when it comes to the elections of these directors. All main-board listed companies need to appoint at least three independent non-executive directors and they must get the support of more than 50 per cent of shareholders at annual meetings. The problem is that many companies do not have a process for small shareholders to nominate people to these roles. The usual practice is for management or nomination committee members to choose friends or contacts as candidates. Minority shareholders therefore usually only get to rubber-stamp their approval. According to a report by the CFA Institute, companies in Hong Kong, India, the Philippines and Singapore that are family or government-controlled effectively dictate the nomination and election of all directors, including independent non-executive directors. The result in many cases is that the board is controlled by major shareholders and the independent non-executive directors are token figures, rather than true representatives for all shareholders. One may argue that most small retail investors are not interested in joining a board. But what about institutional investors such as fund houses or pension fund managers? Lee Kha Loon, Asia Pacific head of the CFA Institute Centre for Financial Market Integrity, said allowing minority shareholders to nominate and select independent non-executive directors, would add true independence to a board. Minority investors do have some say. For example, an investor who has a 5 per cent shareholding in a listed firm in Singapore, Hong Kong, or Malaysia is able to nominate board candidates. But few have a clear process for all shareholders to nominate candidates. Setting a good example A bouquet to the HKEx, which last week announced the salary package of Charles Li Xiaojia as he took the bourse's helm from Paul Chow Man-yiu. The announcement explained clearly how his HK$7.2 million base salary and other allowances are determined. This example should be followed by other regulators such as the Securities and Futures Commission and Hong Kong Monetary Authority.