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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Четверг, 02 мая 2019 апдейт:

Executive Summary III Approach to the Study

The topic of CG and its improvement

When the topic of CG is raised in any discussion it is readily apparent that the potential breadth of the topic is only matched by the profusion of applied, conceptual and value¬laden variations in what the term «corporate governance» means and implies to different people. It attracts a diverse range of reactions, opinions, beliefs and approaches to it, ranging from the philosophical to the commercial, from the theoretical to the applied, as well as from almost doctrinal insistence to resistance and repudiation. And there are significantly different methodologies claiming to measure it.

The task of this study has to some extent been simplified by the central mandate on which it is based: to undertake a comparative study of shareholder rights, remedies and protections and board processes within the context of public listed companies.

The objective of this study, to derive recommendations that improve the CG system in Hong Kong, requires an interpretation of CG and what constitutes «good CG». As explained in Section 2 of this Report, «good CG» is assumed to underpin shareholder rights, remedies and protections, as well as an appropriate level of oversight of the management by the owners of a company. It is further assumed to be desirable as a means of fostering market integrity and market confidence. This requires mechanisms that bring non-locally incorporated companies within a local CG framework supporting good CG in those issuers. Moreover, the viewpoint of a minority shareholder is adopted (as opposed to, for example, board members or other stakeholders in a company's operations). For the purposes of organizing material generated by the study the «good CG» concept is understood as being dependent on five key variables:

Information - Involvement - Equality - Accountability - Effectiveness.

The specific focus on shareholder rights, remedies and protections means that other matters sometimes invoked in the CG debate receive little or no attention herein, including gender and racial diversity, corporate social responsibility, and the relationship between CG and share price performance.

This Report has sought to make recommendations that work to improve regulatory efficiency, and has leaned toward proposals that are balanced, practical and implementable. Accordingly, any temptation to make large-scale headline-grabbing recommendations has been resisted. Recommendations that require fundamental changes to the law or regulatory architecture are resource consuming (time, people and money), and often have an uncertain outcome given the difficulty of getting all stakeholders on board. Wherever possible, this Report has sought to work within the existing regulatory architecture. Larger scale changes have formed part of the recommendations only where this appeared to be necessary or desirable. The Report also recognizes an «acupuncture» value in some improvements that may seem relatively minor but have the capacity of stimulating further development and changed behaviour in due course.

Recommendations have also been considered in view of their overall effectiveness. This is partly determined by the structure of a CG system, and significantly influenced by the degree of mismatch between the different priorities of relevant actors. Right-minded CG principles do need to confront the realities of the market, as they may lead to unexpected outcomes or box-tick approaches to compliance that does not serve the underlying objectives. Where that happens, a CG rule or principle can become a false validator of the behaviour actually undertaken. It may also operate as a distraction from moving forward on other, more effective, means of achieving the relevant objective.

Promoting change in markets that have a significant element of self-regulation, like Hong Kong, also presents the hurdle that change may be rejected on the basis of short¬term self-interest. It is not unusual for a proposal to be rebuffed by citing established corporate and cultural values, or claiming that issuers are not ready for it. In this context, regulatory dicta are unlikely to lead to development. On the other hand, readiness is frequently precipitated by regulatory changes, rather than the other way around. So an important consideration is how to resolve this apparent contradiction. The «acupuncture» approach may be of some value in this context.

While an important orientation of this Report is to identify and explore CG topics that have attracted debate in global CG communities, whether by regulatory agencies or other stakeholders, the Report is not limited to these topics. It can be read as an exploration of ideas intended to create discussion around them. Many of the recommendations represent ideas that will require further consideration as to their detail, and possibly additional investigation. Some may stimulate new ways of thinking about old problems. Some may survive the test of scrutiny and be implemented.

Organization of this Report

This Report comprises five main sections and five Appendices.

Section 1 explains the scope and purposes of this Report as well as its limitations. It sets the Report in the context of developments in Hong Kong over the past two to three decades, as well as the global developments that have had an impact on the development process in Hong Kong.

Section 2 discusses the initial methodological questions that needed to be addressed from the outset of the study.

Section 3 comprises the substantive analysis of this Report. It commences by identifying the thematic topics and trends in regulating CG as well as important overarching considerations including the role of culture, the methodology of assessing CG, the costs and benefits of CG, competitiveness, and what is meant by «effectiveness». This leads to the analysis of Hong Kong's CG system in the context of the other jurisdictions studied. The Report considers each jurisdiction's legal and regulatory system and, where relevant, the other characteristics of its market including political, historical, cultural and social factors. Where relevant, previous proposals to reform the CG system are reviewed. Based on the analysis of the data, Section 3 identifies recommendations for changes in Hong Kong's CG system. As Section 3 is essential to understanding the considerations giving rise to the recommendations, an abridged text of the analysis is presented in Part IV of this Executive Summary.

Section 4 presents the recommendations of this Report. Each recommendation provides a cross-reference to the relevant analysis in Section 3 from which it has been derived. Recommendations have been developed according to a number of factors: the level of complexity involved to implement it, the support for it, and whether it is likely to be contentious to the industry. This gives rise to a classification that serves as a general indicator of overall support/difficulty for each recommendation: Compelling - Advocate - Support - Explore. These are not "levels" per se, meaning that each may be worth developing or implementing for different reasons.

Section 5 concludes.

Reference material concerning the jurisdictions considered is set out in Appendices I to V to this Report. Each Appendix provides a description of the essential structure and characteristics of the CG system in the relevant jurisdiction together with recent developments of interest to this study. This covers the operation of key regulatory agencies, policy development, enforcement mechanisms, the legal and regulatory framework, shareholder rights and protections, and the regulation of non-locally incorporated companies.


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
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
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
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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