The importance of corporate governance (CG) for Hong Kong as an international financial centre cannot be over-emphasized.
Management of a publicly listed company bears considerable responsibility, both commercially and under the law, as regards the manner in which the affairs of the company are undertaken, and with responsibility also comes the possibility of negligence, recklessness or abuse. Where management failures are isolated to a specific company, the shareholders in that company suffer. Where management failures become more widespread, it becomes a concern for the market as a whole and suggests a structural or systemic failure in the checks, balances and mechanisms of accountability normally imposed by a system of CG on the exercise of management authority.
Hong Kong's emergence as a global financial centre has brought far greater attention to be placed on its role in the global market place and the standards it engages as compared to other leading global markets. This necessarily includes the vast array of topics that sit under the umbrella of CG. The risk of CG failures, whether isolated or recurring, has not escaped the attention of the Government, regulatory agencies, market participants, professional and retail investors, and other stakeholders in the integrity and prosperity of the market. The highest levels of the Hong Kong Special Administrative Region (HKSAR) Government have also emphasized the desire to establish Hong Kong «as a paragon of corporate governance» that better protects the interests of all stakeholders.
Standards are of course relative, expectations do change over time, and views on the appropriate role of CG in the commercial functioning of a company are heterogeneous. Since at least the time of the Great Depression in the 1930s and certainly since the 1980s, there has been a deeper recognition of the fundamental connection between the health of a market and the health of the economy it serves. CG is central to this relationship, and over the course of the 20th century standards and expectations have steadily increased, a trend that is continuing with increasing clarity and scope in the early part of the present century.