Governance Perspectives - The Journal Of The Hong Kong .

President’s MessageCelebrating ourprofessional communityIwould like to start with a word ofcongratulation to our secretariat on theexcellent Annual Dinner held last month. Ourpremier social event of the year attracted arecord 600 guests, and was a testament tothe strength of our professional communityand standing in Hong Kong.If you missed this event, you can catch upon the proceedings in the Institute Newssection of this month’s journal. I would onlylike to add that this year’s Annual Dinnerwas a perfect example of the benefits ofgetting involved in our extracurricularevents and activities. It was not only anoccasion for good company, good food andgood fun, but it also helped to cultivatea sense of belonging to our profession.Being a company secretary can be a lonelycalling sometimes, reminding directors oftheir governance and ethical obligationsis not always the most popular task, so ithelps to know that you have the backing ofyour profession to do all you can to ensuregovernance standards are maintained.This brings me rather conveniently to thetheme of this month’s journal. No surprisesthis month, our journal takes on our mostcommon theme – corporate governance.In many ways all of our themes, of course,are part of governance in its broadestdefinition, but this month we go for thejugular – what is the meaning of goodgovernance? Is there a global consensusFebruary 2017 04building around the basic principles ofgood governance? And what can we doas company secretaries to ensure that theorganisations we work for are able to fullyrealise the benefits of good governance?The answer to that last question may seemrather obvious to readers of this journal,but there are insights into the companysecretarial role in the cover story which alltoo often go under the radar. For example,Edward Speed, Chairman, Spencer Stuart,points out that, where the tenure of acompany secretary is longer than that ofdirectors, he or she becomes the repositoryof institutional knowledge and continuityin an organisation. This point has practicalsignificance since it means that we can playa critical role in ensuring that governancestandards and the values of the organisationare kept intact through successive changesto the board’s composition.Another point raised in the cover storywhich I feel gets too little attention is thefact that governance is a journey not adestination. Certainly, there are generallyaccepted principles of good governancewhich apply to all companies and allgeographies, but every company and everyboard is unique. Our job is not just aboutknowing the principles of good governance,it is also about being able to apply theseprinciples to the specific circumstancesof the organisation we work for. Oftenit will take good judgement, togetherwith no small amount of diplomacy andperseverance, to get from where you are towhere you want to be.Finally, before I go I would like to say afew words about the Peer to Peer articlein this month’s journal, which looks atplans to create a new professional bodyfor corporate secretaries in Thailand.Thailand, like Indonesia, is not currentlypart of the global Chartered Secretarialbody (the Institute of Chartered Secretariesand Administrators), but has an activeand growing community of corporatesecretaries. It will be interesting to seehow the creation of this new professionalbody will develop in the years ahead. Inaddition, I look forward to future articlesin this series. I believe closer ties with ourprofessional peers in Asia strengthens ourinstitute and helps to broaden our horizonsin terms of what the corporate secretarialrole involves under the different social,regulatory and political conditions in placein different jurisdictions.Ivan Tam FCIS FCS

President’s ��社交盛事共吸引 �略。例如 Spencer �我濟，地位崇高。主 席 Edward Speed 指 出 ， 假 如 公 司 力，還有相當的交際們最常見的主題 ��廣義的管治的一部分，但今期我們最 後 ， 我 想 談 談 本 期 月 刊 內 的 Peer ��獲得最大的益處？谭国荣 FCIS FCSFebruary 2017 05

Cover StoryGovernanceperspectivesFebruary 2017 06

Cover StoryCorporate governance practices vary internationally, but is a global consensus emerging on corporategovernance best practice? Moreover, how will the changing attitudes to governance affect thecompany secretary role? Edward Speed, the London-based Chairman; and Alice Au, the Hong Kongbased director; of the global executive search and leadership consulting firm Spencer Stuart, give aglobal and a local perspective on these questions.There used to be an assumptionthat corporate governancestandards would converge around theworld on the back of globalisation, butmany differences still remain in theway different jurisdictions approachgovernance issues – do you thinka global consensus is emerging oncorporate governance best practices?ES: ‘I think we have to recognise thatthere are different mixes of publiccompanies and private companies invarious geographies, and that many listedcompanies have a controlling shareholder– that is true in Hong Kong for example– and that does impact on governance.However, I do think there are threegenerally accepted principles of goodgovernance coming through which arerelevant wherever companies are based.One of these principles is that ofindependence: are all shareholders’interests being protected by a board ofdirectors? We have seen an increasingfocus, certainly in the US and here in theUK, on the real independence of boarddirectors. Secondly, I think there has alsobeen a focus on boards taking a longerterm view of the objectives and thestrategic direction of the company. Thisis a reaction against ‘short termism’ thatcompanies are often accused of. Thirdly,I think people are increasingly seeing theneed for a separation of the chairmanand the CEO roles. This is a little morecontentious, certainly in the US, but wehave seen convergence towards this.Companies are either separating the roles, or,in the case of the US, they are strengtheningthe position of the lead independent directorso that there is a strong counter-balanceto the executive power of the combinedchairman and CEO role.In addition to these three themes comingthrough, I think generally, globally thereis also a recognition that some limits toboard tenure are required. This links toindependence in that independence onlylasts so long – directors who have beenon the board for 20 years can be perceivedas having “gone native”.’Looking at the situation here in HongKong, would it be fair to say that someof the principles you mention – theseparation of the chairman and theCEO roles and the need for independentdirectors in particular – have metsome resistance?AA: ‘We would be the first to say that onesize does not fit all as far as corporategovernance is concerned. That has to dowith the different regulations, as wellas the different shareholding structuresin different jurisdictions. But here inHong Kong and China, I don’t think thereis resistance to having independentdirectors. The listing rules in Hong Kongmake it very clear that a third of theboard needs to be independent andthat there needs to be at least threeindependent directors on the board – andall companies are complying with that.There is more of a grey area when youcome to define independence, of course.The Stock Exchange has a definition ofindependence but the grey area reallycomes when you get to issues such asthe one Edward was just referring to –the need for term limits. Now, when anindividual has been on the board for along time, we often hear the argumentthat the individual is very independent-Highlights perceptions of good governance will vary according to the varyingrequirements of investors and as a result of different regulatory andshareholding structures while there is no one size fits all in governance, there is a consensus buildingaround the basic principles of good governance these principles include the need for genuinely independent directors, theneed for longer-term planning and the preference to separate the chairmanand CEO rolesFebruary 2017 07

Cover StoryI don’t think there is something wecould call perfect corporate governance,though there will be common themes –such as the need for transparency andindependence – which investors, nomatter where they are from, will wantAlice Au, Director, Spencer Stuartminded so there shouldn’t be a problem.We accept that there will sometimes beexceptions, but as a general rule termlimits are a good thing because theyrevitalise the board.I would add that where our clientshave listed subsidiaries outside ofHong Kong, in London or in the US forexample, they are facing shareholderswho are increasingly asking about theindependence of their directors. I havea case that we are working on wherethe overseas shareholders are askingwhether directors who have been on theboard for 10 years can still be consideredindependent. So shareholders do lookat this issue, they will question it at thesubsidiary level and then at the grouplevel as well. So I think this plays a partin changing attitudes. If shareholders askthese questions often enough, companiescome to realise that, even though itmay not be a legal requirement, havingterm limits is part of good governance.I am seeing this here in Hong Kong andI think it also applies to Greater Chinacompanies as well.’February 2017 08ES: ‘I think that corporate governanceis a journey and Hong Kong has comea long way. I don’t think we want to bedemonising very successful Hong Kongbusinessmen and women who holdcombined chairman and CEO positions.All we have to make sure is that we havestrong independent oversight of theexecutive. That could be carried out by ahighly respected director who would beseen as holding executives, including thechairman and CEO, accountable. In a waywe would rather have that than havingsomeone made chairman and the previouschairman/CEO going on as before.’Could we turn to board evaluation.Are you seeing more acceptance ofthis as a good

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