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HKICPA Best Corporate Governance Awards, sees organizations stepping up efforts in sustainability and social responsibility

05 December 2019

(HONG KONG, 5 December 2019) As the Best Corporate Governance Awards (“BCGA”) organized by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) enters its 20th year, the judges commended listed companies and public sector organizations, for their contributions to the significant enhancements of corporate governance (CG) in Hong Kong over the years, which has been vital to ensuring that Hong Kong’s standards remain in line with international standards. Although many improvements have been made, the judges urged corporations to continue to strengthen the transparency, accountability and diversity of their governing boards, heeding the changes to the Corporate Governance Code and related Listing Rules effective earlier this year. 

This year the judges gave out 26 awards – a record high and three more than last year. They found increasing quality in sustainability reporting with a record number of potential candidates for the Sustainability and Social Responsibility (“SSR”) Awards passing through initial vetting, and more SSR Awards being given out. Small-cap companies and public sector organizations are also seen to be stepping up efforts, in environmental social and governance (“ESG”) reporting.

“To preserve Hong Kong’s reputation as a leading international finance centre in the highly competitive global environment, it is vital to uphold a strong corporate governance regime. HKICPA remains as committed as ever to promoting and supporting good corporate governance and sustainability practices in the city, making sure that Hong Kong stays firmly aligned with evolving global best practices. This will help retain investor and public confidence in the Hong Kong capital market in the future,” said Mr. Patrick Law, President of HKICPA and Chairman of the Judging Panel.  

Over the years, the CG architecture, policies and practices of the average listed company have become more sophisticated. Regulators, investors and the public expect much more of companies nowadays, and this is reflected in the changes to the Listing Rules, and the progressive upgrading of the Corporate Governance Code, and the ESG Reporting Guide, under the Listing Rules. The Companies Ordinance has also been modernized and incorporates additional corporate governance requirements. “This year, we are very pleased to see a number of first-time winners in the different awards categories and from a broad range of industries”, explains Patrick Law. 

New awardees in 2019 were AAC Technologies Holdings Inc., CGN Power Co., Ltd, Vitasoy International Holdings Limited, China Mobile Limited, Landsea Green Group Co. Ltd., Drainage Services Department, Construction Industry Council, and NWS Holdings Limited (see appendix).

In selecting the award winners, the judges looked for voluntary disclosures and practices beyond the minimum legal and regulatory requirements. “BCGA aim to establish meaningful benchmarks of best practices in the Hong Kong on which other listed companies and public sector organizations can model their own corporate governance development,” said Ms. Loren Tang, Chair of the BCGA Organizing Committee. During the review evaluation process, the judges and reviewers considered companies’ overall corporate governance performance, hoping to identify clear indications of a deep-rooted, good governance culture, and assessed the transparency and scope of relevant information on matters of investor or public interest or concern contained within a company’s annual or sustainability reports.

“While there are more awards in total this year, once again no diamond awards, reserved for companies and organizations demonstrating the highest standards of CG, have been given out. The judges felt that expectations are increasing and that there is scope, even for organizations with high standards, to further raise their game. The judges see this as a valuable message to send,” Ms. Loren Tang added.

The 2019 BCGA winners were selected by an expert panel of judges. Initially around 500 annual and over 500 sustainability reports underwent an initial screening process.  Then the Review Panel carried out an in-depth assessment of the disclosures and practices of the best candidates in order to draw up shortlists for the judges to determine the winners in the different award categories. 

Areas of Improvement 

The overall awareness and understanding of corporate governance and the quality of reporting have come a long way since the inception of the Awards. The pace of change has been even faster with sustainability reporting in recent years, says the HKICPA.
On sustainability, the judges recorded that more companies are seeking independent external assurance for their sustainability reports, but recommended companies to develop clear strategies, objectives, and concrete targets. They should also regularly analyse and discuss the progress made towards meeting those targets. Balance, with regard to the positives and negatives, is also another area companies need to heed in sustainability reporting.

A few key weaknesses in boards were also identified during the scoring process, including a lack of information on evaluations of board performance, as recommended under the Corporate Governance Code. “Where companies indicated that evaluation was conducted, in most cases, they did not give any details of matters such as how the evaluation was carried out and what qualities and functions were being assessed,” noted Mr. Patrick Rozario, Chairman of the Review Panel. 

The judges also found information on the process for the selection of directors, including executive directors (“EDs”) and independent non-executive directors (“INEDs”), and on the reasons for resignations, could be enhanced in most reports.  In the public sector, few organizations distinguish clearly between NEDs and INEDs or indicate criteria for directors’ independence. 

While generally there were improvements identified by the judges in the disclosure of the composition of boards and the background of directors, in terms of board diversity, not enough companies set clear policies and objectives and report on progress towards achieving them. 

In addition, in family businesses, in particular, investors could be given more information about the skillsets that newly-appointed family members can bring to the board. Also, succession planning is not discussed widely enough. Ensuring a smooth and transparent transition in leadership at the right time is important for investors to have trust and confidence in a company’s future prospects.

The tenure of directors on the board, particularly INEDs, the judges said, should not be indefinitely long. “Many companies with INEDs serving well over nine years did not provide any explanation of why they were still considered to be independent and should stay on the board. This is an area boards can work further on,” said Mr. Rozario.


List of Awardees

Judges' report