NewIndependent directors' role stirs debate in Hong Kong
To protect both majorities and minorities, HK could use voting system for the independents
Should the term "independent" be exorcised from boardroom director titles? That was one question, posed only half-jokingly, by Low Chee Keong, a Chinese University professor and corporate governance expert, at a recent freewheeling seminar on the role of independent directors in Hong Kong.
"In an environment like Hong Kong where there is a strong presence of controlling shareholders, this lack of clarity between non-executive directors and independent non-executive directors raises issues," said Low, a former member of the stock exchange's Listing Committee.
It is a topical issue in a city where old friends and business partners take up supposedly independent positions on each other's boards. Such chumminess often extends across group companies with the same faces popping up at different firms within the same holding firm.
Critics say it undermines corporate governance and company earnings are the poorer for it.
The global academic jury is still out, suggests Low. Independent non-executive directors did not "contribute materially" to better corporate financial performance, but they did help "higher-quality financial reporting", he said, citing various studies.
One idea that went nowhere four years ago was to cap the number of listed company directorships an individual could hold at six.