In gender equality and corporate governance, Hong Kong can be a champion of change
- Corporate social responsibility in the region lags behind international best practices, which gives Hong Kong a chance to lead by example – by committing to gender equality. HKEX now expects all firms listed here to have a diversity policy
One of Hong Kong’s greatest strengths is its ability to adapt to changing conditions and grasp new opportunities as they emerge. Throughout my career I have watched Hong Kong reinvent itself over and over, reinforcing its competitiveness and exerting an influence that belies its size. Our community has repeatedly acted with the foresight and determination that keep Hong Kong relevant and thriving, even during times when we might have felt the odds were stacked against us.
And I now believe we have another opportunity to be champions of change in a field that is personally important to me, one that I think will be defining for the global corporate community in the decades to follow.
A successful business almost always plays a meaningful role in its wider community and has strong governance, integrity and purpose at its core. We live in a part of the world, however, where corporate social responsibility (CSR) and general corporate governance standards in business lag behind international best practices, and I believe this opens up a real opportunity for Hong Kong to lead by example.
As chairman of one of Hong Kong’s most systemically important organisations, I am unabashedly committed to Hong Kong Exchanges and Clearing leading from the front in this regard. I have recently committed a portion of my own HKEX director’s fee to the pursuit of broad CSR objectives, as I believe leading by example is both a personal and corporate imperative.
Corporate governance isn’t just some vague approach to running a good company – it is a culture and a clear set of rules and procedures that leads to accountability in the boardroom as well as in management. Good governance is responsible governance and ultimately results in a business that is more resilient, a business that is better placed to capitalise on opportunities presented to it, and a business that will perform better.
As Hong Kong’s financial markets become more international and more complex, with a wide range of companies from all over the world listing here, robust corporate governance standards have become crucial to long-term sustainability. International investors and businesses already laud our rule of law and our attitudes towards efficiency and execution, but without better standards of governance, our competitive standing could be eroded and we would no longer be able to attract large companies and, critically, the international investor base that makes Hong Kong the most vibrant of Asia’s financial markets.
Both as a very visible, well-connected business in our own right, and as a frontline regulator of listed companies, HKEX has a powerful podium to drive change – and we intend to use it. Hong Kong has had corporate governance rules codified in its Listing Rules for 20 years, so they aren’t new to us – but they have taken on a new significance in the past several years.
We introduced our Environmental, Social and Governance (ESG) Reporting Guide into the Listing Rules in 2013 to encourage companies to focus on environmental and social issues, as well as a specific provision for equal opportunity and anti-discrimination policies. ESG reporting was voluntary at the time, but we made it mandatory in 2016 and the provision for equal opportunity and anti-discrimination was enhanced into a “comply or explain” provision.
We can do better. We must do better.
I am determined to put HKEX at the frontier of the change that is needed. We recently made our commitment to gender equality as enshrined in the UN’s Women’s Empowerment Principles; and in January this year, HKEX upgraded a provision for gender diversity in the Listing Rules to a rule. This means that all companies listed in Hong Kong must have and disclose a diversity policy, along with any measurable objectives for implementing the policy and tracking progress towards diversity.
We have also amended the code on the identification, selection and nomination process to bring more transparency and accountability to the election of directors, including non-executive directors. We believe nomination committees should shoulder responsibility for the selection of the right candidates by considering the different perspectives, skills and experience a candidate would bring to the board.
We should be rightly proud of our business community and our financial markets, but fierce international competition and rising expectations means that we collectively and individually need to embrace changes that improve the long-term health of Hong Kong’s business community.
We have a real opportunity to show the way in good governance, trust and transparency. We can be Asia’s business and financial market of choice: connecting China, connecting the world.
Good corporate governance is not a box-ticking exercise, it is a critical cornerstone of good business practice. In time, I’m confident that it has the potential to become a defining characteristic of our market.
Laura M. Cha is chairman of Hong Kong Exchanges and Clearing
