Title: The Development of Corporate Governance in Hong Kong Paul M Y Chow Chief Executive Hong Kong Exchang
1The Development of Corporate Governance in
Hong Kong Paul M Y ChowChief ExecutiveHong
Kong Exchanges and Clearing LimitedPresented at
the AIA Luncheon, 20 August 2003
2The Two Nots
- Not solely a matter of rules and regulatory
enforcement - Responsibility cannot rest with one body
Also a matter of culture, of ethics
Many parties involved
3Purpose and Nature
- Intermediate Targets
- Processes of decision-making and accountability
Final Outcome Issuers make fair and value-added
decisions for shareholders
4Corporate Governance is therefore about PROCESSES
- The processes used to direct and manage the
business and affairs of the company - with objective of balancing
- The attainment of corporate objectives
- The alignment of corporate behaviour with the
expectations of society - The accountability to recognised stakeholders
5 The PROCESSES involve
- Responsibilities
- Accountabilities
- Check and balances
Who should do what
To whom those with responsibilities must account
and how
The system of supervision and control procedures
and communication flows
6Regulators Roles in Promoting Good Corporate
Governance
- Promote awareness of company directors
2. Promote high level of transparency
3. Provide stakeholders with remedies against
unfair behaviour
7Historical Development of Corporate Governance in
Hong Kong
8HKExs Initiatives in 1990s
1993 Introduced non-mandatory Code of Best
Practice
1995 Required issuers to include a statement of
compliance
1996 Required fuller disclosure of information to
assess suitability of directors
1993
1994
1995
1996
1997
1998
1999
1994 Required issuers to disclose detailed
directors/management information
1994 Announced guidelines on independent
non-executive directors
1998 Revised Code of Best Practice
9Other Key Milestones
SCCLR
- Issued Phase I/II consultation papers on
corporate governance
10Market Perception on Corporate Governance
- Connected transactions not in the interests of
minority shareholders - Unreasonably high remuneration of directors of
some poorly performing companies - A number of listed companies are illiquid and
with little genuine public floats - General concerns about regulation and disclosure
of China-related issuers - Lack of confidence in the regulation of sponsors
and IFAs
11Reasons for the Market Perception
- Inability of regulators to enforce boundary of
unacceptable behaviour - Investors lack legal means to pursue corporate
misdemeanours - Regulators powers to supervise listed companies
are insufficient
12Recent Corporate Governance Initiatives
13Paragon of Corporate Governance
- January 2002, HKEx
- Issued consultation paper on proposed amendments
to the Listing Rules - July 2002, HKEx
- Issued consultation papers on initial listing
criteria and the delisting mechanism - November 2002, HKEx
- Issued consultation papers on criteria for
continued listing
14Paragon of Corporate Governance
- May 2003, HKEx SFC
- Jointly issued consultation paper on the
regulation of sponsors and IFAs - May 2003, FSTB SFC
- Jointly issued Derivative action consultation
paper - June 2003, SCCLR
- Issued Phase II consultation paper
15Paragon of Corporate Governance
- Other Work In Progress
- SFC
- Working on legislation governing public
offerings of securities - HK Society of Accountants SCCLR
- Reviewing the regulation of accounts and the
accountancy profession and proposing to establish
an Independent Investigation Board as well as a
Financial Review Reporting Panel - Government-appointed Expert Group
- Reviewing the alignment of responsibilities
among the 3 tiers of regulatory system
16Thank you