Corporate governance
Telling it
The winners of the Institute’s
Best Corporate Governance Disclosure Awards
2013 maintain high standards of practices and
performance. A Plus finds out how and why they
set new benchmarks in transparency
Illustrations by
Harry Harrison
20
December 2013
like it is...
W
hen it comes to identifying stakeholders, Beijing-based technology
giant Lenovo takes the
broadest view possible. “Lenovo’s success is built on… our ability to deliver
on our pledges to investors, employees,
customers, local communities, the
planet and future generations,” says
Wong Wai-ming, the company’s Senior Vice President and Chief Financial Officer.
It’s that kind of global engagement
that made Mainland-based companies among the most-enhanced
winners at the Hong Kong Institute
of CPAs’ Best Corporate Governance
Disclosure Awards, announced last
month. “With the Mainland, you can
really see the improvement,” says Susanna Chiu, the Institute’s President
and Chair of the Judging Panel.
Lenovo was one of three Mainland-based companies that picked up
accolades, collecting a Platinum Award
in the H-share Companies and Other
Mainland Enterprises category. “We’re
highly honoured by this award,” says
Wong, an Institute member.
However, Lenovo – which absorbed the personal computer division of IBM in 2005 and has a
presence in 160 countries – could be
expected to have a more cosmopolitan attitude. “I think Lenovo is really
more of an international company,”
notes Patrick Rozario, Chairman of
the Awards Organizing Committee
and Director and Head of Risk Advisory Services at BDO Hong Kong.
Chiu welcomed an increasing
number of entries from private Mainland companies in addition to stateowned enterprises and singled out
Lenovo’s “systematic environmental
reporting” for particular praise.
The judges were also impressed
by the other two Mainland winners:
China Minsheng Banking Corporation, which picked up the Gold Award
in the same category, and China
Shenhua Energy Company, which
achieved a Special Mention in the
Sustainability and Social Responsibility Reporting Award category.
“The continuing competition among
Mainland companies was encouraging and helped to bring out new contenders,” says Peter Tisman, the Institute’s Director of Specialist Practices.
Minsheng, one of the largest privately owned financial institutions
in the Mainland, has long stressed
its commitment to a higher standard
of corporate governance. Its nonperforming loan ratio is one of the lowest in the nation due to its modern
risk management policies, while last
year, the Chinese Academy of Social
Sciences rated it number one for social responsibility among domestic
banks.
It continues to shine in corporate
governance through innovation. “Its
independent non-executive directors
are required to spend two or three
days a month working at the bank,”
Chiu points out.
China Shenhua Energy, meanwhile, achieved its Special Mention
in a difficult and controversial sector:
coal. The 73-percent-state-owned
company is the largest coal producer
in China. “It’s a conservative, even seDecember 2013
21
Corporate governance
cretive, industry,” Chiu says of coal mining,
“and China Shenhua Energy has really made
an effort in promoting transparency.”
Setting an example
Introduced in 2000, the Best Corporate
Governance Disclosure Awards are one
of Hong Kong’s largest and most distinguished awards for corporate governance.
“The awards have been recognized as a
hallmark of corporate excellence since
their inception,” says Joseph Mau, Company Secretary and Head of Secretarial Services, Hong Kong Exchanges and Clearing
and an Institute member.
Entrants say the awards criteria help
to frame their corporate governance standards. “The awards recognize excellence
in reporting that goes beyond mere compliance with basic standards and rules,
and therefore provide a good, independent
evaluation of whether we have managed
to deliver what we set out to achieve,” says
Securities and Futures Commission Chief
Executive Officer Ashley Alder.
This year reflects the first awards since
more than 30 new code provisions became
effective as part of the Corporate Governance Code (part of Appendix 14 to the
Rules Governing the Listing of Securities
on The Stock Exchange of Hong Kong). The
provisions cover board composition, remuneration, accountability and audit, communications with shareholders, and other
issues.
“We refined the marking scheme based
on the revised corporate governance code,”
says Rozario of this year’s awards, which
were the 14th annual edition. “The judges
have looked for evidence that more listed
companies and public sector organizations
have embedded good governance into their
organizational culture.”
This includes, for example, adopting the
new corporate governance requirements
and best practices. “We take account of
sustainability and social responsibility considerations in their business strategy and
operations, and acknowledging the issue of
diversity in the nomination process for new
directors,” Rozario adds.
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December 2013
“It was not just about meeting the minimum
standards changes to the corporate
governance code implemented last year.”
Chiu says it was encouraging to see entrants going beyond what was required
under the new code. “It was more competitive,” she observes. “It was not just about
meeting the minimum standards changes
to the corporate governance code implemented last year.”
Tisman says the core of the awards’ success is the realization that the implementation of good corporate governance isn’t
merely the warm glow of societal approval;
it also contributes meaningfully to a company’s bottom line. The winners agree. “We
believe good corporate governance is the
backbone to a successful and sustainable
company,” says Christobelle Liao, Company
Secretary and Corporate Counsel at The
Hongkong and Shanghai Hotels.
Room for improvement
Recipients accept that companies can always do better. “We are delighted with the
Gold Award,” says Alder, referring to his
agency’s success as the only recipient in the
Public Sector/Not-for-profit category. “This
encourages us to keep on enhancing the
quality of our reporting,” he adds.
Mau at HKEx says the Institute’s awards
judging process encourages companies to
look for improvements. “The commentaries
from the judging panel, which comprises experts from all parts of the governance arena,
provide us with insights for the improvement of transparency and accountability
through our annual reporting,” he says.
This year, Diamond Awards, the highest honour, were given in only two categories and both went to previous winners. In
the Hang Seng Index category, CLP Holdings maintained its position as the highest
benchmark for Hong Kong companies. It
was the power company’s 11th successive
Diamond Award in its category.
“Over the years, CLP has established a
strong corporate governance culture with
emphasis on honesty and integrity within
the organization,” says CLP Company Secretary April Chan. “We aim at reinforcing
and enhancing Hong Kong’s reputation as
a world-class financial centre for local and
overseas investors.”
CLP pipped the MTR Corporation,
which picked up the Platinum Award. “We
are thrilled to see the company’s continuous efforts in enhancing corporate governance were recognized,” says Wong Wailing, the railway and property company’s
Senior Manager – Company Secretarial.
HKEx followed behind with the Gold
Award. “[The award] provides us with the
motivation and momentum to stay in the
forefront regarding our corporate governance practices,” Mau adds.
Insurance giant Prudential took top
honours in the Non-Hang Seng Index
(Large Market Capitalization) category.
Alan Porter, its Group Company Secretary
in London, says the 165-year-old company’s international reach encourages higher
standards of corporate governance. “Prudential is listed on four stock exchanges –
Hong Kong, London, Singapore and New
York – and we aim to be transparent and accountable to all our shareholders,” he says.
Another venerable company, The Hongkong and Shanghai Hotels, founded in
1866, won the Platinum Award. “Good governance is not about having a governance
code or policies or disclosure, but how it is
applied in practice, from being sanctioned
by the board and reaching all levels and operations of the group,” says Liao.
Hysan Development Company collected
a Gold Award in the category. “As a familycontrolled, listed company, we hope that
[we] can provide some inspirational value,”
says Wendy Yung, Executive Director and
Company Secretary at Hysan and an Institute
member. “Practising good governance does
not mean that lots of financial resources or
very complex board processes and systems
are required.”
A Special Mention made of Transport International Holdings (formerly the Kowloon
Motor Bus Co.) rounded out the winners’ list.
Only one award was given out in the
Non-Hang Seng Index (Mid-to-small Market Capitalization) category, that of Gold to
SOCAM Development, a unit of the Shui On
Group and a previous winner. Rozario said
he would still like to see a higher standard
of entries in this category. “There is a lot of
room for improvement,” he notes.
Chiu says that entrants in the category
made some encouraging advances. “They
are getting better at aspects of transparency,
such as the reporting of related-party transactions,” the President adds.
Another category where standards
should be higher, according to the Institute,
is Public Sector/Not-for-profit, where the
SFC picked up the only award. “It was the
most disappointing category,” says Rozario.
The Institute plans to work more closely
with not-for-profit and non-governmental
organizations in the future through its “CPAs
for NGOs” programme launched earlier this
month as part of the commemoration of the
Institute’s 40th anniversary. It is designed to
improve their disclosure and other governance standards.
The winning companies say they will
strive to do better at next year’s awards.
Most companies were reluctant to admit
what areas at which they could do better.
CLP, one of the few that did, says it hopes to
expand the size of its board.
Indeed, CLP’s Chan sees the improvement of corporate governance standards as
a work in progress. “We review our principles and practices to reflect changes in regulations and international developments,”
she says. “We recognize that corporate governance is an evolving process.”
AWARD WINNERS
Hang Seng Index
Diamond: CLP Holdings
Platinum: MTR Corporation
Gold: Hong Kong Exchanges and Clearing
H-share Companies and Other Mainland Enterprises
Diamond: No award
Platinum: Lenovo Group
Gold: China Minsheng Banking Corporation
Non-Hang Seng Index (Large Market Capitalization)
Diamond: Prudential
Platinum: The Hongkong and Shanghai Hotels
Gold: Hysan Development Company
Special Mention: Transport International Holdings
Public Sector/Not-for-profit
Diamond: No award
Platinum: No award
Gold: Securities and Futures Commission
Non-Hang Seng Index
(Mid-to-small Market Capitalization)
Diamond: No award
Platinum: No award
Gold: SOCAM Development
Sustainability and Social Responsibility Reporting Award
Overall Winner: CLP Holdings
Special Mention: The Hongkong and Shanghai Hotels
Special Mention: China Shenhua Energy Company
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