Hong Kong corporate governance scorecard shows improvement needed

The latest corporate governance scorecard assessing listed companies in Hong Kong shows that improvement is needed and directors ought to stay up to speed with the latest corporate governance developments, according to the Hong Kong Institute of Directors.

The 2016 survey of 120 companies published this week found that when compared to the 121 firms assessed for the last survey in 2012 mean score had improved by 5.1% when the same criteria were compared. However the latest survey had added new criteria which corresponded to the 2015 edition of the OECD Principles of Corporate Governance. These additional areas of assessment included risk management structure and functions, CSR reporting timeliness and quality, and the structure of the corporate governance committee. When these areas were added the scores were at the same level as in 2012.

The Hong Kong Institute of Directors said the survey found there was room for improvement in corporate governance among companies newly listed and new constituents of indices in the past four years. The report said that this pointed to the need for company directors to stay up to speed with corporate governance developments and gain new knowledge so that they could drive the sustainable and professional development of the corporation that they serve.

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.”

The criteria of the survey were based on OECD Principles of Corporate Governance and the Corporate Governance Code of the Hong Kong Exchanges. The 120 Hong Kong-listed firms were evaluated in five areas the rights of shareholders; the equitable treatment of shareholders; role of stakeholders: disclosure and transparency and board responsibilities based on their publicly available data published in 2015-2016.

The 2016 HKIoD Corporate Governance Score-card survey,  was conducted by a research team of the Centre for Corporate Governance and Financial Policy of Hong Kong Baptist University advised by Cheung.

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