Leadership Forum 2005 Workshop I: Corporate Governance in Practice

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Leadership Forum 2005 Workshop I Corporate
Governance in Practice
Paul Chow Chief Executive, HKEx 16 June 2005
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Pressure for corporate governance reforms comes
from many directions
Corporate scandals
Higher expectations from investors
Evolution/ convergence of international best
practices
CG Reforms
Intense competition for businesses and funding
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In Hong Kong, Corporate Governance standards have
enhanced significantly since the early 1990s
1993 2000
2001
2002
2003
2004

• Code of best practices
• Disclosure in Annual Reports
• Guidelines on INEDs

• SCCLR CG proposals (phase 1)

• HKEx Consultation on CG issues

• HKEx Consultation Conclusions on CG issues
• FSTB Corporate Action Plan
• SCCLR CG proposals (phase 2)

• Code on CG Practices requirement of CG Report
• Amendments to Listing Rules
• Enshrine key Listing Rules in statute
• Regulation of sponsors IFAs
• Regulation of accounting profession

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In particular, major CG reforms have been
implemented recently
Code on CG Practices CG Report

• Make reference to UK Combined Code
• Comply or explain approach

Amendments to Listing Rules related to CG issues

• Increase minimum number of INEDs from 2 to 3
• Mandate the requirement of establishing an audit
  committee which comprises non-executive directors
  only
• Strengthen the rules governing notifiable
  transactions and connected transactions
• Mandate the disclosure of individual directors
  remuneration on a named basis
• Require any subsequent refreshments of the
  general mandate be subject to independent
  shareholders approval

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In particular, major CG reforms have been
implemented recently (contd)
Enshrine key Listing Rules provisions in statute

• Consider to enshrine the following provisions
• Regular financial reporting obligations of listed
  companies
• Disclosure obligations in relation to corporate
  transactions (particularly connected
  transactions)
• Obligation to disclose price-sensitive information

Regulation of sponsors IFAs

• Clarify the role and responsibilities of sponsors
  and IFAs (e.g. definition of independence
  expectation on due diligence)

Regulation of the accounting profession

• Establish the Audit Investigation Board (AIB)
• Establish the Financial Reporting Review Panel
  (FRRP)

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Conclusions
Current status in HK

• Major CG reforms taken place
• CG regulations in HK broadly aligned with
  international standards best practices
• Market players digesting and implementing new
  requirements

Going forward

• Promote a compliance culture CG a matter of
  ethics, not box-checking
• Enhance monitoring and enforcement

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• Thank you