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Corporate Governance Level of Hong Kong-Listed Companies Improving Steadily

The corporate governance level of Hong Kong-listed companies is steadily improving, according to the "2016 HKIoD Corporate Governance Score-card.

Released by the Hong Kong Institute of Directors, the mean CGI score of sample companies in the 2016 survey improved by 5.1%. However, when it comes to the new assessment areas, the sample companies' performance appeared stagnant.

The survey found, worthy of notice, room for improvement in corporate governance among companies newly listed and new constituents of indices in the past four years. That pointed to the need for company directors to stay up to speed with corporate governance developments and gain new knowledge so that they may drive the sustainable and professional development of the corporation that they serve.

The regularly updated HKIoD Corporate Governance Score-card survey aims to document and evaluate corporate governance practices of the most representative of listed companies in Hong Kong, thereby helping Hong Kong-listed companies, policy makers and regulators to identify ways to improve corporate governance practices.

The 2016 HKIoD Corporate Governance Score-card survey, sponsored by the Corporate Governance Development Foundation Fund, was conducted by a research team of the Centre for Corporate Governance and Financial Policy of Hong Kong Baptist University and with Prof Stephen YL Cheung (President, The Education University of Hong Kong) as advisor.

The criteria of the survey were based on OECD Principles of Corporate Governance and the Corporate Governance Code of the Hong Kong Exchanges and Clearing Limited).

The 120 Hong Kong-listed firms were evaluated on five aspects: (1) Rights of shareholders; (2) Equitable treatment of shareholders; (3) Role of stakeholders: (4) Disclosure and transparency, and (5) Board responsibilities.

The companies surveyed were constituents of the Hang Seng Index, Hang Seng HK Large Cap Index, Hang Seng China-Affiliated Corporation Index), and Hang Seng China Enterprise Index.

HSI constituents performed the best among constituents of all four market indices

Hang Seng Index (HSI): 74.69
Hang Seng China Enterprise Index (HSCEI): 72.77
Hang Seng HK Large Cap Index (HSLI): 72.14
Hang Seng China-Affiliated Corporation Index (HSCCI): 70.45

The energy sector leads the pack by industry

Energy: 76.61
Industrials: 75.93
Financials: 74.61
Telecommunications: 73.85
Information Technology: 72.77

The 10 Companies with the Highest CGI Scores (in the order of stock code)

CLP Holdings (2) HSBC Holdings (5)
Hang Seng Bank (11) MTR Corporation (66)
HKEX (388) CNOOC (883)
Lenovo Group (992) China Shenhua (1088)
COSCO Ship Port (1199) AAC Tech (2018)

 

“While it is particularly encouraging to see that, compared with a similar survey conducted four years ago, most companies have shown improvements in their corporate governance standards, it is important that HKEX continues to promote good corporate governance amongst its listed companies,” says David Graham, Chief Regulatory Officer and Head of Listing of HKEX.

Henry Lai, Chairman of HKIoD, said that "good corporate governance is of utmost importance to the success of a company as well as the sustainable growth of the economy and competitiveness of Hong Kong as an international financial center.”

This latest score-card is the fifth published by HKIoD and it was held in 2016 instead of 2015 to accommodate OECD changes.

Professor Stephen Cheung, President of The Education University of Hong Kong, who led the survey, said, "Good corporate governance is not static, but a process constantly evolving. A company cannot stop at meeting existing requirements, because new requirements based on international best practices and experience are continually surfacing and being promoted.

“This latest survey, for example, asked 30% more questions than the last. We found that, just using the same criteria as in the 2012 survey, the corporate governance standard of the surveyed companies improved on average, but when evaluated based on the updated standards, the companies had not made any advancement.

“Hence, it is important for Hong Kong-listed companies to take corporate governance more seriously and pay attention to the latest developments in good corporate governance practices."

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