Report on Improving Corporate Governance in Hong Kong

Оригинал на английском языке.
Гонконгский институт лицензированных публичных бухгалтеров
Hong Kong Institute of Certified Public Accountants
Авторы: Syren Johnstone и Say H Goo
Обзор текущего состояния (дата издания отчета 15.12.2017) корпоративного права Гонконга, основанного на Ординансе "О компаниях" 2014 года (Hong Kong Companies Ordinance) и Ординансе "О ценных бумагах и фьючерсах" 2003 года (Hong Kong Securities and Futures Ordinance). Исследование недостатков действующего режима и предложения о направлениях развития.

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Вторник, 21 мая 2019

3. Discussion and analysis of jurisdictions studied. 3.7.2 Policy development agencies

Reflecting the high value the UK Government places on CG, it has been active in conducting enquiries into key concerns of CG. A characteristic of these enquiries is that they are frequent, openly conducted, forward looking, and tend to result in developments in the infrastructure of CG, either through changes in primary legislation or in applicable regulations, notably the FRC's UK CG Code. The primary point of impact of these developments tends to be on the requirements imposed on a company and its management although less frequently, if at all, on the rights of shareholders per se. Appendix II.2.1 discusses a number of such examples. While the scope of these enquiry- driven developments are often the consequence of market incidents, many are based on thought leadership, a notable characteristic of which is that the enquiry is not constrained by merely following what is happening in other countries.

In the United States, policy is developed at different levels of the regulatory architecture according to the nature of the problem being addressed. As discussed in Appendices III.1.1 and III.5, there is an active range of voices on the question of CG standards. In 2014 the SEC took the step of establishing the Office of the Investor Advocate, which, inter alia, provides a voice for investors as regards decisions and development of proposed changes to rules made by the SEC or SROs, i.e. the Exchanges. It also studies investor behaviour and provides data that feed into policy choices including assessments of the economic analyses of proposed rule changes. Disclosure reform, shareholder rights, and financial reporting are among its list of top priorities for 2016, as discussed in Appendix III.4.1.

Outside of the statutory agencies, both the UK and the United States possess a panoply of bodies that weigh in on the topic of CG standards. However, as discussed in Appendices II.5 and III.5 there appears to be little coordination between them toward establishing common goals with each instead pursuing selective and sometimes specialized agendas.

While there is an obvious utility in seeing a range of views expressed, the greater the number of bodies that do not coordinate with each other may introduce doubts as to the authoritativeness of each - each body frequently tends to claim to reflect balanced views supported more widely in the market. There are attendant concerns over the lack of accountability of the views expressed. Against this context there is much to be said for an agency such as the UK's FRC, which has a very clear mandate supported by the FCA, to drive the setting of CG standards that reflect a broader cross-section of stakeholders in the betterment of market standards. In this regard the United States lacks such a singularly clear voice, other than that intermittently expressed by Congress. While the SEC's efforts are of course significant in this regard, their voice is often subject to challenge in court as regards the more detailed processes associate with good CG.

In Singapore, not unlike Hong Kong, CG policy is developed at different levels by a number of government agencies and industry players, as discussed in Appendices V.1 and V.5. At the highest level, the MoF is the single shareholder of Temasek Holding that holds stakes in local listed companies and GLCs providing direct influence by the government on the CG of these companies and CG culture generally. At the frontline level, there is a clear line of division of responsibilities between MAS and SGX and a clear hierarchy with MAS clearly on top of SGX with power to formulate CG policy and implement it through the issuance and enforcement of CG Code.

In Mainland China, the administrative structure for the implementation of corporate governance policy is remarkably similar to that seen in Singapore with a clear line of authority on policy matters coming from the CCP through to the State Council and its MoF and CSRC for implementation. While the policy agencies are active in their policy formulation and implementation, there are doubts as whether the policy is effective in achieving good CG. The MoF and CSRC do regularly conduct consultation with market participants, and undertake reviews and assessments (Appendix IV.2.2). On the whole, in 2012 the IMF has been fairly positive about the effectiveness of CSRC (see Appendix IV. 1.2).

Hong Kong

The experience in Hong Kong is rather divided in this regard, depending on the nature of the body making the proposals and of course the type of proposal. There is a mixed picture at the highest levels of policy-making, i.e. the first tier of Hong Kong's three-tier system of regulation, namely the Financial Services and the Treasury Bureau, the Companies Registry and Standing Committee on Company Law Reform (SCCLR) and expert groups appointed by the Government. In contrast to the UK, it is far less certain as to whether the recommendations of these bodies will lead to developments in Hong Kong's CG infrastructure, with the exception of the SCCLR whose recommendations have led to a number of amendments to the Companies Ordinance before 2014 and the major rewrite of the Companies Ordinance which came into force from 2014. For example, the Report on the Penny Stocks in September 2002 and the report of the Expert Group on listing reform in 2003, which was not pursued. Recommendations for reform by other government agencies, such as the Law Reform Commission's report on class actions in 2012, remains with the Department of Justice and the Hong Kong Special Administrative Region (HKSAR) Government and is no longer listed by the LRC as a current project. This reflects the particular political dynamics of Hong Kong.

Whether the Hong Kong government should learn from Singapore's and Mainland China's style of top-down policy formulation as a means to be more assertive in formulating guiding policy for the SFC and HKEX turns on the fundamental differences between these political systems. While a firmer top-down policy direction may be beneficial, or even necessary, to move Hong Kong forward from a repeating cycle of many unchanged and un-progressed issues, it remains a question of whether the social needs of Hong Kong are sufficient to warrant intervention by the government through, for example, the introduction of new legislation if the SFC and HKEX are insufficiently enabled to resolve the issues within the existing framework. Nonetheless, in the absence of government intervention, a style of regulatory-driven governance moving away from the status quo would be strongly objected to by many market participants, as was the case recently with the overwhelming rejection of the proposal for the SFC gaining more powers over the listed market.

The position at the second and third tiers of Hong Kong's regulatory architecture is clearer. As a general rule of thumb, proposals made by the HKEX that promote CG standards tend to find their way, with the support of the SFC, into the CG infrastructure of the listing rules. There are many examples of this, notably with regard to the continued development of the HK CG Code, which is a centrepiece of the HKEX's CG standard setting for listed issuers. Conversely, HKEX proposals that may challenge accepted standards of CG may experience substantial push-back from either or both of the SFC as well as institutional shareholders and shareholder interest groups. The push-back works both ways. For example, the issue of WVR or dual class shares, discussed in Appendix I.2.1 (see also Section 3.5.2 «Weighted voting rights»), was an example of many in the market claiming this presented a risk to the minimum standards of good CG; in contrast, many of the proposals made by the HKEX in its 2010 to 2011 consultation on the HK CG Code that would foster good CG were rejected by the market. Another example is the FSTB and SFC's joint consultation paper proposing to empower the SFC to bring derivative actions on behalf of a company in May 2003. The consultation conclusions issued in November 2003 announced the decision to keep the proposal in abeyance in view of the limited support and numerous reservations.

There are some success stories even where proposals were controversial at time. For example, the proposal for giving statutory backing to the price sensitive disclosure requirements of the listing rules, which led to the implementation of Part XIVA of the SFO.

The transparency of policy development is mixed across the three tiers. Although Legco panel discussions are generally open to public scrutiny, many of the formative responses to policy development proposals suffer from a greater or lesser degree of translucency as compared to transparency. For example, the response time to consultation paper responses by the LRC tends to be long. The LRC issued a consultation paper on class action in Hong Kong in November 2009. It did not publish a final report which takes into account all responses to the consultation paper until May 2012, over two years later proposing the adoption of class action for consumer cases (see Appendix I.2.1). However, until today, there is no further action on the part of the DoJ, and no adequate explanation has been offered for the delay.

The SFC normally goes above and beyond the public consultation requirements imposed on it under the SFO, pursuant to a policy it has voluntarily adopted and which has been vetted and approved, in 2002-2003, by the Process Review Panel. Nevertheless, part of that policy involves engaging in a proxy form of public consultation that involves a focused consultation of interested parties whose identity remain undisclosed. A recent case in point was the SFC's «Circular to Licensed Corporations Regarding Measures for Augmenting the Accountability of Senior Management» issued 16 December 2016, which involved a proxy consultation yet took many industry participants by surprise.

Where the SEHK proposes changes to the listing rules, the SFO requires it to submit to the SFC explanations of their purpose and likely effect, including their effect on the investing public. However, this material is not publicly disclosed, even if the rule change is eventually implemented. In practice, much of the ongoing policy development is undertaken either by the Listing Committee or the somewhat opaque «High Level Group» established pursuant to the SFC/HKEX «Memorandum of Understanding Governing Listing Matters»(the «Listing MOU»). This group is comprised of senior representatives from the SFC and SEHK with the function to review «systemic and policy issues» relating to listing matters. However, transparency in these agencies of the regulators also falls short, this being one of the driving objectives underlying the SFC/HKEX Joint Consultation Paper on listing reform - namely, to increase transparency and accountability for regulatory decision-making, including important listing decisions and the reasons for those decisions. However, that consultation met with significant problems that resulted in it not proceeding, in part due to unaddressed legal problems inherent in the proposals, a concern that had been raised in the Financial Affairs Panel of the Legislative Council. The follow-up Conclusions Paper issued in 2017 followed a similarly problematic path.

What does this say about the effectiveness of policy development agencies in Hong Kong? While it is not possible to draw too definitive a conclusion on the point, the experience does tend to suggest that where CG-supportive proposals originate from independent practitioner-based bodies, i.e. the Listing Committee, there is a significantly stronger likelihood of it being accepted. The recent SFC/HKEX Joint Consultation on Listing Reform (2016) serves as an interesting litmus test for this hypothesis - following the release of the consultation paper, the Listing Committee of the SEHK came out in strong opposition to the proposal, which coincided with the negative views expressed by many of the respondents to the proposals. At one level this might be due to the greater complexity and reach of certain types of proposal, at another it reflects a fundamental feature of Hong Kong's CG policy development that is rooted in the market's deep suspicion of government and regulatory interference.

Hong Kong is often characterized as a laissez-faire system of capitalism, which might tend to suggest that centralized directives from the Government or its agencies would find less traction in a market that has traditionally been dominated by a family controlled companies and a large number of small stockbrokers that service a significant retail participation in the market. Reflecting this, businesses in Hong Kong have, historically, assumed a degree of self-regulatory responsibility. However, the laissez-faire characterization of Hong Kong is arguably no longer entirely correct and, while dominant economic entities continue to exert influence, over the past two decades the financial system is becoming increasingly rule based and transparent.

As with other leading financial centres over the span of the 20th century, Hong Kong's regulatory architecture has evolved a system of public regulatory agencies. Nevertheless, the appropriate balance of responsibilities between those agencies and the involvement of the market remains very much under discussion, as evidenced by the Joint Consultation paper. This was an important issue in the Hay Davison Report, which set the framework underlying Hong Kong's subsequent regulatory evolution following its release in 1988. Like the Gower Report in the UK in 1984, the Hay Davison Report came down in favour of continued market involvement and that market participants are the best judges of specific issues relating to listed companies: «practitioner regulation should continue but that safeguards will have to be introduced at every level.» Accordingly, primacy in setting CG standards of listed issuers remains with the exchange, its regulatory functions operated through the Listing Committee, and subject to the reserve powers of the SFC.

This then begs the question, from which point of Hong Kong's regulatory architecture should policy development emerge? One might also frame the question another way: which bodies should be involved in the development and assessment of policy?

Discussion

As to the issue of thought leadership, by comparison to the UK and the United States, Hong Kong in general appears to fare poorly. Whether for better or worse, Hong Kong tends to follow a more conservative route of following international practices than leading them, with very few exceptions to this rule. Many reasons might be suggested for this - perhaps it is rooted in Hong Kong's relatively more recent emergence as an international capital centre, its laissez-faire leaning, the lesser powers of the SFC (as compared to the FCA and the SEC) to impose and enforce legal requirements, the misalignment of values of the functional constituencies represented in the Legislative Council from those of the Government and the statutory regulators, a belief that the only way to progress is to emulate the West, or possibly even in the city's transitional political state from being a British colony following the resumption of Chinese sovereignty under a one country two systems structure that is still being expressed and developed in its implementation. In some ways this is surprising given the emergence of Hong Kong as a global financial centre and the high-level participation Hong Kong has in international regulatory bodies - notably, the SFC has been strongly represented on IOCSO for many years, with the CEO of the SFC currently holding the IOSCO Chairmanship. In the UK, Members of the House of Commons and the House of Lords have established a somewhat unique body, the All-Party Parliamentary Corporate Governance Group («APPCGG»). The purpose of this informal group is to develop and enhance the understanding of CG at Westminster and to influence policy making in this context. It regularly holds networking events where key CG issues are discussed with its members and the government. While there does not appear to be anything similar to that in Hong Kong, the newly formed Financial Leaders Forum was established to facilitate the Government playing a more active and leading role in relation to policymaking and matters relating to, inter alia, financial safety and regulation. The HKSAR Chief Executive and Financial Secretary, ad the Chairman and CEO of the SFC are among its members, although the HKEX/SEHK is not represented. This body does not have a CG focus, however, it is hoped that developments that may spring from the Forum may serve to facilitate thought leadership on CG.

While the historical perspective may explain the lack of thought leadership, Hong Kong needs to assert itself more in this regard given that it has become a global financial centre. It needs to develop measures that would be effective bearing in mind the CG culture, legal and regulatory and political circumstances and state of economic development in Asia, while striving also to meet if not surpass the international benchmarks and best practices. Merely following international or UK best practices may not suffice, though there is great value in consulting those practices in formulating its own effective measures.

Another possible hindrance to the CG discussion in Hong Kong is that it tends to be overly polarized. As with the other jurisdictions studied, Hong Kong possesses proportionately as many bodies that are charged with promoting the perceived values of good CG as it does interests that are aligned toward the hegemony of the commercial voice.

While Hong Kong's conservative policy approach to CG development may have served Hong Kong well in the past, this may no longer be inappropriate to the extent that the circumstances of Hong Kong's market is different in significant ways from either the UK or the United States In particular, the prevalence of businesses being listed in Hong Kong that originates from an emerging and centrally controlled economy, namely, Mainland China, where the CG culture is still embryonic. Hong Kong may need to consider the wisdom of adopting a stronger regulatory interventionist approach and move away from the traditional laissez-faire approach. Singapore has been more pro¬active in developing ways to regulate Mainland companies, for example, it has changed its definition of independent directors to ensure they are independent from the controlling shareholders precisely because of the increasing number of Mainland SOEs listed in SGX (see Appendix V.7.2). As CG culture is still weak in Mainland China, Hong Kong cannot rely on the changes in Mainland CG standards to improve the quality of Mainland companies listed in Hong Kong, some of which are not listed in Mainland China and therefore not subject to the CG standards there. There is very little influence Hong Kong can bring to the reform and enforcement of CG standards in Mainland China (i.e. other than through persuasive diplomacy) where CG policies are being formulated from the very top leadership in the ruling CCP. What Hong Kong can do is to lead by way of example by raising the standards and enforcing them against all companies listed in Hong Kong, including the Mainland issuers. Thus, Hong Kong needs to continue to work on finding and implementing effective measures.

The foregoing leads to different possible lines of thinking as regards proposals for the purposes of this study, the first two being process driven to improve transparency, the third and fourth relating to the operation of regulatory agencies to improve thought leadership and policy development.

First, as regards the development of the listing rules by regulatory agencies and the transparency of the process, it is suggested that explanations for the purpose and effect of a rule that has been implemented should, within a short period thereafter, be made public. Section 24(2)(a) of the SFO requires the SEHK when proposing a new listing rule to explain to the SFC the purpose and likely effect of the rule. Despite the public nature of the market, these explanations are not public documents. Nevertheless, the intended purpose of a listing rule requirement may be important in the context of enforcing it and courts and regulatory tribunals are increasingly being asked to consider the intended purpose of a regulatory provision. For example, in the recent case brought by the SFC in the MMT against CITIC under section 277 of the SFO, the interpretation of a requirement in Chapter 14 of the listing rules was central to the case yet the Tribunal failed to consider a number of highly relevant considerations within the environment of the listing rules, including the origin and intended purposes of the relevant provision in the listing rules. Were a shareholder to seek access to the purpose and effect of a rule because it was relevant to a private action, the primary hurdle would likely be that the SFC may regard the material as being secret pursuant to section 378 of the SFO; in such case the shareholder's remaining recourse would be to seek to issues a summons for discovery of the relevant documents. Accordingly, it is suggested that making the materials publicly available would bring about greater transparency and, importantly, accountability. To be clear, this is not a suggestion that the materials be subject to a public consultation, merely that once the rule has been approved that the explanation of its purposes and effect, as finalized following the SFC's response to it, should be published. While it is recognized that the provisions of section 378 of the SFO will need to be addressed, it is also noted that the SFC has powers under the SFO to make disclosures to the public regarding the performance of its functions. Neither the HKEX nor the SEHK are subject to secrecy provisions in relation to their statement of intended purpose and effect. Anecdotally, regulators seem reluctant to disclose such inner workings, possibly out of a concern that they may affect the way the rule is understood and applied. However, while the suggestion is in fact a lesser degree of transparency than as found via Hansard, Courts and Tribunals that may be required to consider regulatory rules apply well-established procedures of interpretation.

The foregoing leads to Recommendation A4.9.1 «Transparency of listing rule development».

Second, given the considerable delays sometimes experienced in the publication of consultation conclusions and turnaround times of responding to the recommendations of expert groups or responses by regulatory agencies to consultation conclusions, it is suggested that a code be proposed for voluntary adoption by the relevant agency initiating or responding to the recommendation or consultation. There is also some anecdotal evidence that the response times are lengthening, or becoming unpredictable possibly owing to the involvement of vested interest groups. For example, many of the Expert Group's recommendations made in the report published in March 2003, such as removing the listing function from the HKEX to a division within SFC to be known as Hong Kong Listing Authority, remain neither implemented nor firmly rebutted, leaving the debate on the issue continuing, as recently observed in relation to the SFC/HKEX's June 2016 Joint Consultation Paper on listing reform. It is fair to say that the Government, the SFC and the HKEX are responding to the Expert Group's recommendations in different ways, albeit via a circuitous and uncertain route.

Insofar as responding to consultation conclusions are concerned, where the conclusions are not in favour of the recommendations proposed, the Government has tended to shelve the matter for a future open-ended date. The FSTB and SFC's proposal to give SFC power to bring derivative action is an example. There seems to be no periodic review to see if such a proposal should be reconsidered in light of changing circumstances, for example the need to enhance investor protection in preparation for allowing WVR structures in Hong Kong.

Such a code would provide for an obligation to publish consultation conclusions and to respond to recommendations or consultation conclusions within a specified minimum period of time. In the case of publishing consultation conclusions, a maximum of three to six months should be adequate. In the case of responding to recommendations or consultation conclusions, a maximum of one year would appear reasonable as implementation issues often take longer to resolve. Where the date cannot be met, a detailed reason must be provided explaining the scope of work undertaken and the steps put in place to respond or provide a further update by a subsequent date (for example, which would be not more than half of the previous period). The code could be incorporated by reference into the relevant appointment or consultation.

The foregoing leads to Recommendation A4.9.4 «Response time to public enquiries/consultations».

Third, in the absence of any agency that has the development of CG standards and the interests of minority (i.e. non-institutional) shareholders as its primary concern, it is noted that the UK's FRC performs an important role in relation to the former and the SEC's Office of the Investor Advocate and the Investor Advisory Committee performs a role in relation to the latter. The UK has moved from ex post remedies toward ex ante prevention through the CG Code. The United States remains reliant on ex post enforcement, rather than any ex ante CG Code, though this is changing as a result of Enron and GFC as Congress has enacted more proactively oriented laws in response to those crises.

The dual responsibilities model of the oversight of listed issuers in Hong Kong places the development of CG standards primarily in the hands of the SEHK and the enforcement of more serious corporate wrongdoings primarily in the hands of the SFC. As discussed in Section 3.7.1 above, while the content of the SEHK's listing rules fares reasonably well when compared with international standards, weak self-regulation of CG standards leaves an enforcement lacuna that means rules are not necessarily embodied by good standards in practice. Enforcement of the more serious corporate wrongdoings are handled by the SFC that involve standards set not by the SEHK but by legislators.

The SFC is increasingly concerned about CG standards and the costs to the market both as regards its long-standing concern with the protection of investors and its effect on market integrity. However, it is notable that the current divisional structure of the SFC does not contain any discrete functionality that deals with CG per se. The review of corporate disclosures and the development and approval of listing rules is primarily a matter handled by the Corporate Finance Division whereas it is the Enforcement Division that has more recently been vocal as to the enforcement of corporate wrongdoings; and the SFC have formed a new operational team between these two divisions and the Intermediaries Division - named "ICE" - that collaborates to deal with difficult issues related to listed companies. It is unclear where in this matrix the interests of shareholders are particularly advocated. The recent CITIC case before the MMT has already been mentioned and the effect of the SFC deciding not to appeal the MMT's finding (that no market misconduct occurred) is of interest in this context: although there appears to be grounds on which the MMT's finding might be challenged the SFC's decision not to appeal affects the ability of investors to obtain a remedy since the compensation claim sought by the SFC against CITIC and its directors under section 213 of the SFO would no longer be able to proceed. Certainly, a decision to appeal is affected by many considerations, not least the SFC's statutory obligation to make efficient use of its resources.

It is suggested that concerns about CG standards, and the corresponding question of when to bring an enforcement action and when not to, provide a context that a more specialized focus group on CG should be formed. The SFC has used specialized focus groups to address specific issues. For example, a Risk & Strategy Unit had been established in response to the post 2008 crisis a to facilitate a centralized approach to identifying and evaluating significant risks facing the financial sector and to help the SFC to more effectively coordinate its overall strategy in this regard. In response to the emergence of Fintech and the challenges it presents, the SFC established the SFC Contact Point and the Fintech Advisory Group in March 2016. The former is a unit within the SFC whereas the latter is comprised of external members whose function is to facilitate the former, in particular as regards understanding the opportunities, risks and regulatory perimeter implications of Fintech. In that function, the latter vehicle appears to serve as a useful semaphore post between commercial needs/tolerances and regulatory insights/expectations without having the burdens (or stigma) of being a think-tank or being formed within a regulatory body.

Developments in the other jurisdictions studied has seen the development of CG standards being moved away from Exchanges to regulators and even the legislature, so the natural question that may be asked is whether it would be appropriate that a CG- focused group should be formed within the SFC. It is suggested that doing so would be hard to implement credibly as it would disrupt the balance of the dual responsibilities model - similar attempts by the SFC to establish bodies that interact with the development of HKEX's policy and rule making role have met with significant problems (as discussed in this section above as regards the SFC/HKEX Joint Consultation).

However, this does not prevent the SFC from itself establishing a clearer voice on CG concerns that should encompass resolving the enforcement lacuna. It is suggested that as an immediately implementable step, the SFC establish an internal unit - the CG Unit - that is advised by an external working group comprised of external experts and industry participants from different sectors of the market - the CG Group. While one might consider giving representation to the SEHK's Listing Committee on the CG Group, it is suggested that this may complicate the free sharing of ideas, involve a vested interest in a process that it would eventually be involved in if a policy proposal advances sufficiently, and invoke concerns similar to the SFC/HKEX Joint Consultation already discussed. Such a CG Unit and CG Group may work to produce solutions in addition to the recommendations in this Report - which operate within the dual responsibilities model - that would assist to close out the enforcement lacuna, which includes: Recommendation A4.6.2 «SFC to develop use of conditions when exercising existing SMLR powers», Recommendation C4.6.1 «SEHK to develop use of existing disciplinary power», Recommendation A4.5.1 «Legal status of CG-related disclosures», Recommendation C4.5.2 «Status of listing rule compliance and related disclosures (continuing)», Recommendation A4.6.3 «Calibrate SFC's powers under the SMLR», Recommendation A4.6.4 «Statutory backing of certain listing rules», Recommendation S4.4.1 «Shareholders as beneficiaries of listing rules» and Recommendation E4.8.2 «Establish an investor protection agency».

Establishing such groups would also be consistent with the SFC's statutory obligation to recommend law reforms. The CG Unit and the CG Group would take as its focus CG and the interests of shareholders (particularly minority shareholders) with a view to promoting CG standards and policy development. The CG Unit would also provide an agency-based contact point for the collection of information relating to problems faced by minority shareholders in relation to shortcomings of CG standards and so would be a meaningful furtherance of the SFC's statutory objectives concerning investor protection. While HKEX still has responsibility for making the rules (subject to SFC approval), the two bodies suggested are able to consider the minority shareholder position from a different perspective - while the SFC's Corporate Finance Division may already do this, it is not as focused as it needs to have regard to both protecting the market interests as well as protecting the interests of minority shareholders, which are sometimes in competition.

The above discussion also connects with the discussion in Section 3.7.3 «Enforcement agencies» that goes further to consider the establishment of a separate enforcement agency, as proposed in Recommendation E4.8.2 «Establish an investor protection agency». If such a new agency were established, it may make sense to place the CG Unit and CG Group within it rather than the SFC.

The foregoing leads to Recommendation E4.8.1 «Establish a CG Unit and CG Group».

 

Содержание отчета

Executive summary
Executive Summary I Key Findings
Executive Summary II Summary of Recommendations
Executive Summary III Approach to the Study
Executive Summary IV Abridged Text of the Analysis

1 Introduction to the study and its purposes
Introduction
1.1 Purpose of this Report
1.2 The development of CG in Hong Kong
1.2.1 Domestic drivers
1.2.2 Global drivers
1.3 Structure of this Report
1.3 Structure of this Report
1.3.1 Methodology
1.3.2 Analysis
1.3.3 Recommendations
1.4 Scope and limitations of this Report
1.5 Next steps

2 Methodology
Introduction
2.1 Scope
2.1.1 CG concepts
2.1.2 CG Geographic reach
2.1.3 CG mechanisms
2.2 Work process
2.2.1 Data collection
2.2.2 Initial data organization
2.2.3 Oral evidence
2.2.4 Parity check
2.2.5 Analysis
2.2.6 recommendations

3 Discussion and analysis of jurisdictions studied
Introduction
3.1 Overarching considerations
3.1.1 Thematic topics
3.1.2 Trends in regulating CG standards
3.1.3 The role of culture
3.1.4 The methodology of assessment
3.1.5 Cost-benefit considerations
3.1.6 Maintaining competitiveness
3.1.7 Effectiveness
3.2 Non-locally incorporated companies
3.2.1 Application of local laws and regulations
3.2.2 Cross border enforcement and cooperation
3.3 Information
3.3.1 Legal status of CG disclosures
3.3.2 Disclosure of listing rule compliance
3.3.3 Board evaluation
3.3.4 Audit committee
3.4 Involvement
3.4.1 Shareholder stewardship
3.4.2 Shareholder votes
3.4.3 Remuneration
3.4.4 Changes of control
3.5 Equality
3.5.1 Voting rights generally
3.5.2 Weighted voting rights
3.6 Accountability
3.6.1 Information disclosures generally
3.6.2 Listing rules
3.6.3 Board refreshment
3.6.4 Appointment of independent directors
3.7 Effectiveness
Part A - CG system design
3.7.1 Impact of regulatory design
3.7.2 Policy development agencies
3.7.3 Enforcement agencies
3.7.4 Audits of public companies
3.7.5 Duties of directors
3.7.6 Role of fiduciary law
Part B - Specific actions
3.7.7 Differentiation of CG requirements
3.7.8 Listing regime standards upon entry
Part C - Independent directors
3.7.9 Determination of independence
3.7.10 Requirements relating to INED performance
3.7.12 Empowerment of INEDs - controlling shareholders
Part D - Other items
3.7.13 Whistle-blowing
3.8 Coda

4 Recommendations
Introduction and approach to the recommendations
Part A - The board
4.1 Processes
4.2 Independent directors
4.3 CG standards
Part B - Enforcement
4.4 Shareholders
4.5 CG disclosures
4.6 Regulators
4.7 Ex ante mechanisms
Part C - Architecture and policy
4.8 Architecture
4.9 Policy
4.10 Summary tables

5 Concluding remarks
5.1 The Recommendations
5.2 The Hong Kong market

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