1. Corporate Governance in Hong Kong
Hong Kong’s position as an international economic and financial center is attributed to its exemplary corporate governance. With Hong Kong’s various authorities and regulatory bodies emphasizing on transparency and accountability for listed companies, Hong Kong was ranked first for corporate governance among 11 Asian countries in 2007. (Refer to Appendix 1) The Stock Exchange of Hong Kong (SEHK) describes corporate governance as the “duties, functions and power of the board of directors as a whole and executives and non-executive directors individually”. These binding responsibilities include the fulfillment of their legal obligations towards the company and its shareholders, the proper conduct of their functions in relation to the company’s business assets, abiding by standards of best practice and ethics as well as accepting responsibility for their actions. 2.Alternative Labels
The common label applied by most Hong Kong companies is Corporate Governance. However, some companies prefer alternative descriptors such as Corporate Risk Management or Enterprise Governance. 3. Introduction of Corporate Governance in Hong Kong
3.1History of Corporate Governance
The history of corporate governance in Hong Kong dates back to the 1700s and the South Sea Bubble episode, where there were fundamental changes in business laws and practices in England. The need to access financial resources and seek economic and social progress has brought corporate governance into greater prominence. As a former British dependent territory, Hong Kong has its regulatory system based on English common law, but its business practices and corporate governance carry both Asian and UK influences. The family ownership structure that prevails in Hong Kong signifies the strong influence of dominant shareholders and a limited voice for minority shareholders. SEHK published its own Code of Best Practice in 1993 to enshrine good corporate governance practice. In addition, many improvements have been made at a macro level since the Asian Financial Crisis in 1997. Corporate governance is increasingly emphasized by government authorities, regulators and NGOs; there is a clear intent to adopt governance standards at the highest level. The following illustrates the typical family business in Hong Kong. The first priority in the family business will be given to the immediate family members, then related parties in business and finally, other shareholders.
Figure 1: Priority (“Concentric rings”) in the family business in Hong Kong Source: Ferdinand A.Gul and Judy S.L.Tsui , The Governance of East Asian Corporations-post Asian Financial Crisis
3.2Nature of Corporate Governance
3.2 Corporate Governance Index in Hong Kong
Corporate Governance Index is an objective benchmark for regulators to distinguish varying corporate governance standards of different companies. The criteria are based on internationally accepted principles of fairness, transparency, accountability, and responsibility in corporate governance. Its qualitative measurement is differentiated from quantitative data and provides investors with better consolidated and more comprehensive analysis of the companies’ profile. Regulators currently recommend that the score should be reviewed regularly and Hong Kong CGI should be charged by HKEx or any independent commercial entity. Source: Hon. Laura M. Cha, member of Exective Council, HKSAR Government, The case for a Corporate Governance Index for Hong Kong. Retrieved from http://www.hkbu.edu.hk/~apcgc/ms-laura.php
4. Influences on Corporate Governance
Quoting from the Manager of CLP Holdings Limited, Mrs. Chan, “Corporate governance is a process of continuous improvement”. In shaping the corporate governance efforts, Hong Kong has taken into account its unique blend of Western and Asian cultures. 4.1Western Influence
Until 1997, Hong Kong was...