Hong Kong tops Singapore on corporate governance but both cities slip
While the finance hubs lead region on corporate standards, they have been marked down by report that cites problematic IPOs and scandals
Hong Kong beat Singapore to have the best corporate governance in Asia this year, but standards in both financial hubs have declined in the past two years and fall short of world-class benchmarks, a report shows.
This year, Hong Kong's overall corporate governance score was 65, edging Singapore on 64, according to the joint report by CLSA and the Asian Corporate Governance Association (ACGA), a non-profit group that promotes corporate governance in Asia. The study is conducted every two years.
In 2012, Singapore had the top corporate governance score of 69 while Hong Kong came second with 66.
"We no longer see any substantive difference in the overall corporate governance quality of Hong Kong and Singapore," the report said.
"Judging by the problematic [initial public offerings] that both Hong Kong and Singapore have allowed in recent years and the numerous corporate scandals that have harmed minority interests, it is hard to argue that either city's corporate governance standards are too high."
It is hard to argue that either city's ... standards are too high
ACGA secretary general Jamie Allen wrote that neither market deserved to be an outright winner. This year, Hong Kong did better than Singapore in securities enforcement and Hong Kong was much tougher than Singapore against insider trading and market manipulation, Allen said.
Singapore scored better on minority shareholder participation in listed companies' annual general meetings and the nomination of independent directors by minority shareholders.
"Following the rapid assimilation of [the mainland] and Hong Kong, the business community and the government [of Hong Kong] are juggling the challenges for more business opportunities against regulatory traditions," Michael Cheng, China and Hong Kong director of the ACGA, wrote in the report.
"There is no clear and coherent policy [in Hong Kong] to support corporate governance reforms. Political expediency and an unwillingness to confront vested interest groups created fragmentation in devising a coherent regulatory framework.
"The conflict of interest of the Hong Kong stock exchange as both a regulator and revenue-generating listed company is unresolved and [Hong Kong] regulatory bodies are not immune from political influence.
"While Hong Kong does not suffer from a lack of qualified [audit] staff, the absence of an independent auditor regulator leads to inconsistent quality of audit across companies in Hong Kong. Consequently, Hong Kong's audit oversight falls short of international standards."
