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HKICPA makes corporate governance recommendations, advocating for a strengthened capital market

02 May 2018

(Hong Kong, 2 May 2018) The Hong Kong Institute of Certified Public Accountants (HKICPA), following an extensive study on corporate governance in key markets, has called for substantial improvements including the establishment by the Government of a high level policy unit; the strengthening of the role of independent non-executive directors (INEDs) to hold corporate boards accountable; and to bring more board actions into the enforcement regime of Securities and Futures Ordinance. 

 

These are some of the wide ranging recommendations based on findings in the Report on Improving Corporate Governance in Hong Kong, a HKICPA-commissioned, independent  comparative study of corporate governance regimes across Hong Kong, the UK, the US, Mainland China and Singapore, with a particular focus on shareholders' rights, remedies and protections, and the regulation of non-Hong Kong incorporated companies.    

"Hong Kong has largely kept up with international developments over the past two decades. However, incremental and reactive changes are no longer enough for Hong Kong to stay ahead as a global player; we need significantly more,” said Mr. Wong Kim Man, convenor of the HKICPA Corporate Governance Working Group.  

"The Government must take the lead in instigating significant changes in some fundamental areas if Hong Kong is to stay ahead as a competitive and well-regulated international financial hub that balances the needs of business development and investor protection," he said.  

While the study, carried out by Syren Johnstone and Say H. Goo of HKU's Asian Institute of International Financial Law, found that Hong Kong’s corporate governance system is on a par with international best practices in many areas, including its statutory law, non-statutory listing rules and codes, and gateway mechanisms for new listings. In order to enhance Hong Kong's attractiveness to investors, certain recommendations made by the consultants in three key areas should receive more immediate attention; namely:

1. Corporate governance architecture and policy

The Government should establish a high level "Corporate Governance Policy Unit" to lead and coordinate policy formulation for a strong corporate governance framework. There also needs to be a discussion among stakeholders as to the overarching objectives that should drive the development of the Hong Kong market.

"The global financial markets are very competitive, and market integrity is key to investor confidence which can be boosted by sharpening Hong Kong's edge in corporate governance," said Mr. Raphael Ding, Chief Executive and Registrar of HKICPA.

"In practice, this means that we need new ideas and new measures to ensure that in the face of rapid market developments, our investor protection and governance models remain robust and effective. The study defines corporate governance in terms of five fundamental aspects - information, involvement, equality, accountability, and effectiveness; and the recommendations are derived from considering these essential elements of good governance."

2.      The Board
 

Independent non-executive directors (INEDs) have a vital part to play in board effectiveness and accountability. The framework around the role and responsibilities of INEDs should be strengthened, as there are significant expectation gaps that need to be addressed. The HKICPA recommends that:

  • The board's corporate governance report should include specific statements on how INEDs have discharged their role and responsibilities. A lead INED should be appointed to oversee such reporting.
  •  Audit committees should make a separate, direct disclosure in the annual report on the work that they have performed, instead of reporting indirectly via the board. This should also be overseen by the lead INED.
  • A code for Non-Executive Directors (NEDs) should be developed by listed companies on a comply-or-explain basis. This would help investors evaluate the role that companies expect their NEDs, and in particular their INEDs, to fulfil and how effective they have been in performing that role, and in upholding good corporate governance and ensuring that the board remained accountable.
  • The board should consider the linkages between INEDs' work, expected time commitment and responsibilities, and their remuneration, and an appropriate disclosure should be made in the corporate governance report.
  • Reflecting their importance to investors and their standing in the market, Hang Seng Index companies should be required to adopt higher corporate governance standards on a comply-or-explain basis.

"Importantly, these measures will underpin the proper role of INEDs on boards and their value in safeguarding investor interests, as well as working in the long-term interests of the company. When institutional investors and corporate boards appreciate this, the demand for and calibre of INEDs will only improve, creating a positive, upward spiral of corporate governance enhancements," said Mr. Ding. "Hopefully, this will also discourage those who see INEDs as being there for window dressing and independent in name only from taking up the role."

3.      Enforcement

When the study looked at the quality of disclosures of information important to investors, and the potential repercussions of inadequate or inaccurate disclosures, it found gaps in enforcement options available to regulators and shareholders in Hong Kong compared with the other markets studied. The study also highlights the need for more effective cooperation and enforcement by regulators on a cross-border basis. The HKICPA recommends that:

  •  Listed companies should be required to disclose any material breaches of listing rules and the steps taken to address these on an ongoing basis, as well as making an annual certification of the position.
  • Corporate governance disclosures and facts stated in INED statements of their independence should be brought within the statutory regime governing the provision of false or misleading information to regulators (i.e., section 384 of the Securities and Futures Ordinance, Cap. 571).
  • The SFC should be given more graduated sanctioning powers, such as the power to fine a company as a warning-cum-precursor to directing the suspension of trading (i.e., under the Securities and Futures (Stock Market Listing) Rules, Cap. 571V). This will also benefit investors and the market as a whole by potentially averting more drastic action.
  • The role of the compliance adviser in newly listed companies should be extended to cover a wider range of corporate governance-related processes, and should be taken up by an IPO sponsor.
  • The government should explore with the Mainland authorities expanding the existing arrangements for reciprocal recognition and enforcement of non-criminal court judgments on specific matters relating to listed companies, their officers and other relevant parties.

Based on the market comparisons, the report puts forward a wide range of recommendations. The HKICPA is proposing that a number of these be taken forward as priority items.

"While we expect that more discussion and debate will be necessary in order to agree on detailed changes, the HKICPA is ready to work with other stakeholders to facilitate further progress in Hong Kong's corporate governance development," says Mr. Ding.

The full report and recommendations are available at https://bit.ly/2KhYN3B.

 

香港會計師公會倡議鞏固資本市場優勢
提出改善建議提升企業管治


(香港,二零一八年五月二日)香港會計師公會對主要市場進行了一項涵蓋甚廣的企業管治研究,提出多項重要改善措施,包括由政府設立高層次的政策小組、加強獨立非執行董事(「獨立非執董」)對公司董事會的問責性,以及《證券及期貨條例》的執法權限應適用於更多董事會業務行為上。

公會委託獨立第三方進行一項比較研究,將香港與英國、美國、中國內地及新加坡的企業管治制度進行對比,編撰了《提升香港企業管治研究報告》,當中重點關注股東權益、補救及保障措施,以及非香港註冊公司的監管等議題,並根據研究結果在不同範疇上提出多項改善建議。

公會企業管治專責小組召集人黃劍文先生表示:「過去二十年,香港的企業管治發展步伐大致與國際同步。然而,漸進被動的步速並不足以令香港穩踞國際前列,我們要更積極往前踏出一大步。」

黃先生續說:「香港要保持競爭力及良好規範的國際金融中心地位,政府必須帶頭推動企業管治從基礎範疇作重要改進,兼能平衡商業發展與投資者保障。」

這次研究由香港大學亞洲國際金融法研究院的Syren Johnstone先生及Say H. Goo教授進行。研究結果指出,香港的企業管治制度在法定規則、上市規則和守則,以及新上市公司批准機制等多方面,均符合國際最佳實務守則。為加強香港對投資者的吸引力,顧問在三大主要範疇提出建議,持份者應多加關注並討論以下建議:

  1. 企業管治架構及政策
    政府應設立高層次的企業管治政策小組,領導及統籌企業管治政策的制定從而優化現有企業管治架構。此外,持份者亦要以推動香港市場發展為首要目標進行討論。

    公會行政總裁兼註冊主任丁偉銓先生說:「環球金融市場競爭激烈,市場健全完善是贏得投資者信心的關鍵。我們可藉着良好企業管治的優勢,增加投資者對香港金融市場的信心。」

    丁先生表示:「在實踐上,我們要有新構思和新措施,確保香港能在瞬息萬變的市場發展中,維持全面有效的投資者保障及管治制度。研究報告從資訊、參與度、公平性、問責性及效率五個基本範疇闡釋企業管治,歸納良好企業管治的關鍵要素,從而提出多項建議。」

     

  2. 董事會
    獨立非執董在董事會有效運作及問責方面擔當重要角色,故應加強其角色及框架內的職責。對現在獨立非執董的實際職能與框架要求的期望落差需要更多關注。公會提出以下建議:

    • 董事會的企業管治報告中,應具體陳述獨立非執董如何執行其職務,並應委任一名首席獨立非執董監察有關報告。
    • 審核委員會應於年報內獨立及直接披露其完成的工作,而非只透過董事會間接報告,並應由首席獨立非執董進行監督。
    • 上市公司應按「不遵守就解釋」原則制定非執董守則,以助投資者評估公司對非執行董事(尤其獨立非執董)職責的期望,以及他們在履行職務、維持良好企業管治及確保董事會保持問責方面的成效。
    • 董事會應將獨立非執董的工作、預計參與時間、職責與薪酬掛鉤,並於企業管治報告作適當披露
    • 生指數成份股公司應按「不遵守就解釋」原則採納更嚴格的企業管治標準,以反映其對投資者的重要性及於市場的地位。

    丁先生說:「更重要的是,這些措施可鞏固獨立非執董在董事會中應有的角色,加強其在維護投資者利益及為公司爭取長遠利益方面的價值。當機構投資者及公司董事會重視獨立非執董,人才的需求及質素便會相應提高,對提高企業管治水平帶來正面積極作用。我們希望這些措施能改善獨立非執董有獨立之名而無實質義務的情況。」

  3. 執法
    在向投資者披露重要資料的質素,以及不足或不準確披露的潛在後果方面,研究發現香港的監管機構及股東可用的執法方案,與所研究的其他市場比較存在差距。研究報告亦指出跨境監管機構需要更有效的合作及執法安排。就此,公會作出以下建議
  • 規定上市公司持續披露任何重大違反上市規則的情況及已採取的補救行動,並就披露狀況發出年度證明。
  • 獨立非執董在獨立聲明所作的企業管治披露及陳述,應受香港法例第571章《證券及期貨條例》第384條有關提供虛假或具誤導性的資料的法規所約束。
  • 賦予證監會分級制裁的權力,例如有權向公司處以罰款作為暫停買賣前的警告(按香港法例第571V章《證券及期貨(在證券市場上市)條例》)。這可避免更嚴厲的制裁行動,對投資者及整體市場有利。
  • 擴大新上市公司合規顧問的職責,涵蓋更全面的企業管治程序,並由上市保薦人擔任。
  • 政府應與內地當局探討,就有關上市公司、其人員及其他相關人士的特定事宜,擴大現有法院非刑事判決互認及執行的安排。

研究報告根據對不同市場的比較提出多項建議,公會提議優先討論其中一些建議。

丁先生說:「我們預計各界要經多番討論及考量,方能就具體改進方案達成共識。公會歡迎隨時與各方持份者合作,推動香港企業管治向前發展。」

公會將報告及相關建議全文上載 https://bit.ly/2KhYN3B 以供參考。

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