the 3rd icac symposium

1

The 3rd ICAC SymposiumThe 3rd ICAC Symposium

Corporate Governance Corporate Governance – The cornerstone– The cornerstone

Estella Ng Estella Ng

Executive DirectorExecutive Director

Hang Lung Properties LimitedHang Lung Properties Limited

2

Corporate GovernanceCorporate Governance

AgendaAgenda

• Introduction – What is Corporate Governance?Introduction – What is Corporate Governance?

• The OECD principles of Corporate The OECD principles of Corporate GovernanceGovernance

• The Corporate Governance in practiceThe Corporate Governance in practice

3

What is Corporate Governance?What is Corporate Governance?

4

Corporate Governance Corporate Governance – The cornerstone– The cornerstone

The cornerstone of the modernThe cornerstone of the modern

market-oriented economymarket-oriented economy

5


• Promote the efficient use of scarce resourcesPromote the efficient use of scarce resources• Promote the trust of investorsPromote the trust of investors• Good corporate governance has a positive link Good corporate governance has a positive link

to economic development and good corporate to economic development and good corporate performanceperformance

• Funds will flow to entities which are seen to Funds will flow to entities which are seen to have internationally accepted standards of have internationally accepted standards of corporate governancecorporate governance

6


Why is it important?Why is it important?• Proliferation of financial scandals and crisisProliferation of financial scandals and crisis• Loss of trust of investorsLoss of trust of investors• Globalization lead to increasing cross-border Globalization lead to increasing cross-border

investment opportunities but investors may not investment opportunities but investors may not have knowledge about the regulatory have knowledge about the regulatory framework of overseas investeesframework of overseas investees

7


• Investors are not willing to invest in Investors are not willing to invest in countries/companies that are corrupt, prone to fraud, countries/companies that are corrupt, prone to fraud, poorly managed and lacking sufficient protection for poorly managed and lacking sufficient protection for investors’ rightsinvestors’ rights

• Securities and company law protection may help, but Securities and company law protection may help, but not enoughnot enough

• Corporate Governance supplements the legal Corporate Governance supplements the legal frameworkframework

8


• Corporate Governance also plays an important Corporate Governance also plays an important role in maintaining corporate integrity and marole in maintaining corporate integrity and managing the risk of corporate fraud, combating anaging the risk of corporate fraud, combating against management misconduct and corruptiongainst management misconduct and corruption

9

Corporate Governance - DefinitionCorporate Governance - Definition

• the system by which business corporations are directed and the system by which business corporations are directed and controlledcontrolled

• specifies the distribution of rights and responsibilities among specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, different participants in the corporation, such as the board, managers, shareholders and other stakeholdersmanagers, shareholders and other stakeholders

• spells out the rules and procedures for making decisions on spells out the rules and procedures for making decisions on corporate affairscorporate affairs

• provides the structure through which the company objectives provides the structure through which the company objectives are set, and the means of attaining those objectives and are set, and the means of attaining those objectives and monitoring performancemonitoring performance

(Source: OECD April 1999)(Source: OECD April 1999)

10

The OECD Principles of The OECD Principles of Corporate GovernanceCorporate Governance

1.1. Ensuring the basis for an effective corporate governance frameworkEnsuring the basis for an effective corporate governance framework2.2. The rights of shareholders and key ownership functionsThe rights of shareholders and key ownership functions3.3. The equitable treatment of shareholdersThe equitable treatment of shareholders4.4. The role of stakeholders in corporate governanceThe role of stakeholders in corporate governance5.5. Disclosure and transparencyDisclosure and transparency6.6. The responsibilities of the boardThe responsibilities of the board

- - The corporate governance framework should ensure the strategic The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the the board, and the board’s accountability to the company and the shareholders.shareholders.

11

Corporate Governance in practiceCorporate Governance in practice

What do the investors expect?What do the investors expect?

““the Code of Corporate Governance the Code of Corporate Governance Practices”Practices”

12

Board of DirectorsBoard of Directors

• Assume responsibility of leadership and Assume responsibility of leadership and control of the corporatecontrol of the corporate

• Direct and supervise the corporate’s affairsDirect and supervise the corporate’s affairs

• Make decisions in the interests of the Make decisions in the interests of the corporatecorporate

13


• Regular meetingsRegular meetings

• Active participationActive participation

• Freedom to include items in agendaFreedom to include items in agenda

• Sufficient notice for board meetingsSufficient notice for board meetings

• Access to advice and services of company Access to advice and services of company secretary and independent professional advicesecretary and independent professional advice

14


• Full record of board/committee minutes, and Full record of board/committee minutes, and available for inspectionavailable for inspection

• Independent non-executive directors should be Independent non-executive directors should be present at board meetings to discuss matter present at board meetings to discuss matter involving conflict of interestinvolving conflict of interest

• Abstain from voting if conflict of interest Abstain from voting if conflict of interest existsexists

• Insurance coverage in respect of legal action Insurance coverage in respect of legal action against directorsagainst directors

15

Chairman and CEOChairman and CEO

• Segregation of the management of the board aSegregation of the management of the board and the day-to-day management of the corporatnd the day-to-day management of the corporate’s businesse’s business

• Balance of power at board level to avoid conceBalance of power at board level to avoid concentration of power in a single individualntration of power in a single individual

16

Chairman and CEOChairman and CEO

• Separation of Chairman and CEOSeparation of Chairman and CEO

• Division of responsibilities between Chairman Division of responsibilities between Chairman and CEO clearly laid down in writingand CEO clearly laid down in writing

17

ChairmanChairman

• Provide leadership for the boardProvide leadership for the board• Ensure the board works effectively and Ensure the board works effectively and

discharges its responsibilitiesdischarges its responsibilities• Ensure good corporate governance practices Ensure good corporate governance practices

and procedures are in placeand procedures are in place• Ensure all directors are properly briefed on Ensure all directors are properly briefed on

issues arising at board meetingissues arising at board meeting• Responsible for ensuring appropriate Responsible for ensuring appropriate

information received by directorsinformation received by directors

18

ChairmanChairman

• Encourage full and active contribution to the Encourage full and active contribution to the board’s affairboard’s affair

• Ensure effective communication between Ensure effective communication between board and the shareholdersboard and the shareholders

• Hold annual meetings with non-executive Hold annual meetings with non-executive directorsdirectors

• Ensure constructive relationships between Ensure constructive relationships between executive and non-executive directorsexecutive and non-executive directors

19

Board CompositionBoard Composition

• Balance of skills and experiencesBalance of skills and experiences• Balanced composition of executive and non-Balanced composition of executive and non-

executive directorsexecutive directors• Non-executive directors should be of sufficient Non-executive directors should be of sufficient

calibrecalibre• Independent non-executive directors should be Independent non-executive directors should be

expressly identifiedexpressly identified• List of directors updated and their respective List of directors updated and their respective

role and function identifiedrole and function identified

20

Appointment, re-election and Appointment, re-election and removal of directorsremoval of directors

• Formal and transparent procedure for Formal and transparent procedure for appointmentappointment

• Succession planSuccession plan

• Re-election at regular intervals Re-election at regular intervals

• Proper explanation for resignation/removal of Proper explanation for resignation/removal of directorsdirectors

21

Appointment, re-election and Appointment, re-election and removal of directorsremoval of directors

• Specific term for non-executive directorsSpecific term for non-executive directors

• All directors subject to retirement by rotation All directors subject to retirement by rotation at regular intervalat regular interval

• Nomination committee formed to make Nomination committee formed to make recommendation on appointment of directors recommendation on appointment of directors and succession planning for directors, and succession planning for directors, chairman and CEOchairman and CEO

22

Responsibilities of directorsResponsibilities of directors

• Keep abreast of the responsibilities as a directorKeep abreast of the responsibilities as a director• Exercise duties of care, skill, integrity and diligence Exercise duties of care, skill, integrity and diligence

expectedexpected• Ensure proper understanding of the operation, Ensure proper understanding of the operation,

business and the regulatory requirementbusiness and the regulatory requirement• Contribute sufficient time and resources to serve the Contribute sufficient time and resources to serve the

corporatecorporate• Attend AGMs to share the views of shareholdersAttend AGMs to share the views of shareholders

23

Non-executive directorsNon-executive directors

• Active participation in board meetingsActive participation in board meetings

• Bring in independent judgmentBring in independent judgment

• Take lead if conflict of interest ariseTake lead if conflict of interest arise

• Serve on committeesServe on committees

• Monitor the corporate’s performance in Monitor the corporate’s performance in achieving pre-set goalsachieving pre-set goals

24

Information access by directorsInformation access by directors

Directors should be provided with accurate Directors should be provided with accurate and appropriate information in order to make and appropriate information in order to make informed decision and to discharge their informed decision and to discharge their responsibilitiesresponsibilities

25

Information access by directorsInformation access by directors

• Agenda and board papers should be sent in full Agenda and board papers should be sent in full in a timely manner to directorsin a timely manner to directors

• Information supplied must be complete and Information supplied must be complete and reliablereliable

• Directors should have access to the senior Directors should have access to the senior management for informationmanagement for information

• Information supplied should be of form and Information supplied should be of form and quality to facilitate informed decisionquality to facilitate informed decision

26

Remuneration of directors and Remuneration of directors and senior managementsenior management

• Transparency of directors’ remuneration Transparency of directors’ remuneration policypolicy

• Remuneration should be sufficient but not Remuneration should be sufficient but not excessiveexcessive

• Each director not to involve in deciding his/her Each director not to involve in deciding his/her own remunerationown remuneration

27

Remuneration CommitteeRemuneration Committee

• Remuneration committee to be formed, mainly from Remuneration committee to be formed, mainly from non-executive directorsnon-executive directors

• Consult Chairman/CEO if neededConsult Chairman/CEO if needed• Access to professional advice, market comparable Access to professional advice, market comparable

informationinformation• Make recommendation on policy and structure of Make recommendation on policy and structure of

remunerationremuneration• Determine specific remuneration packages of all Determine specific remuneration packages of all

executive directors and senior managementexecutive directors and senior management

28

Remuneration CommitteeRemuneration Committee

• Review and approve performance-based Review and approve performance-based remunerationremuneration

• Review and approve compensation Review and approve compensation arrangement in connection with loss or arrangement in connection with loss or termination of office, dismissal or removal of termination of office, dismissal or removal of directors for misconductdirectors for misconduct

29

Accountability and Audit Accountability and Audit – Financial Reporting– Financial Reporting

• Management provide explanation and information to Management provide explanation and information to the board to enable them to make informed the board to enable them to make informed assessment of financial and other informationassessment of financial and other information

• The board should present comprehensive assessment The board should present comprehensive assessment of the corporate’s performance, position and of the corporate’s performance, position and prospects in annual and interim reports, price-prospects in annual and interim reports, price-sensitive announcements and other financial sensitive announcements and other financial disclosuresdisclosures

30

Accountability and Audit Accountability and Audit – Internal Control– Internal Control

• Ensure the maintenance of sound and effective Ensure the maintenance of sound and effective internal controls to safeguard assetsinternal controls to safeguard assets

• Conduct regular reviews of the effectiveness Conduct regular reviews of the effectiveness of the internal control system, covering of the internal control system, covering financial, operational, compliance and risk financial, operational, compliance and risk management control functionsmanagement control functions

• Prevent fraud, corruption, and malpracticesPrevent fraud, corruption, and malpractices

31

Audit CommitteeAudit Committee

• Have clear terms of referenceHave clear terms of reference

• A formal and transparent arrangement to apply A formal and transparent arrangement to apply the financial reporting and internal control the financial reporting and internal control principles and maintain appropriate principles and maintain appropriate relationship with external auditorsrelationship with external auditors

32


• Full minutes of audit committee to be keptFull minutes of audit committee to be kept

• Provided with sufficient resources to discharge Provided with sufficient resources to discharge its dutiesits duties

• Independent from external auditorsIndependent from external auditors

33


• Make recommendation for appointment and Make recommendation for appointment and removal of external auditorsremoval of external auditors

• Monitor the effectiveness of the audit process, Monitor the effectiveness of the audit process, ensuring auditor’s independence and ensuring auditor’s independence and objectivityobjectivity

• Monitor the integrity of the financial Monitor the integrity of the financial disclosuresdisclosures

• Oversight of the financial reporting and Oversight of the financial reporting and internal control proceduresinternal control procedures

34

Delegation by the BoardDelegation by the Board

• Formal schedule of matters specifically Formal schedule of matters specifically reserved to the board for decisionreserved to the board for decision

• Clear directions to management as to matters Clear directions to management as to matters requiring board approval before decision maderequiring board approval before decision made

35

Delegation by the BoardDelegation by the Board

• Clear directions to the delegation of the Clear directions to the delegation of the management and administration functions as management and administration functions as well as the powers of managementwell as the powers of management

• Review the arrangement for segregation of Review the arrangement for segregation of duties between board and management duties between board and management regularlyregularly

• Board Committee to be formed, with specific Board Committee to be formed, with specific terms of reference, as neededterms of reference, as needed

36

Communication with ShareholdersCommunication with Shareholders- Effective communication- Effective communication

• Maintain on-going dialogue with shareholders Maintain on-going dialogue with shareholders and make use of annual general meetings or and make use of annual general meetings or other general meetings to communicate with other general meetings to communicate with shareholdersshareholders

• Transparency in corporate governance Transparency in corporate governance practices and business performances through practices and business performances through proper and adequate disclosuresproper and adequate disclosures

• Encourage shareholders’ participationEncourage shareholders’ participation

37

Communication with ShareholdersCommunication with Shareholders- Effective communication- Effective communication

• Separate resolution for each separate issueSeparate resolution for each separate issue• Chairman of the board and chairman of each board Chairman of the board and chairman of each board

committees be present in general meetings to answer committees be present in general meetings to answer questions at any general meetingquestions at any general meeting

• Chairman of independent board committee be present Chairman of independent board committee be present to answer any questions in any general meeting to to answer any questions in any general meeting to approve transaction requiring independent approve transaction requiring independent shareholders’ approvalshareholders’ approval

38

Communication with ShareholdersCommunication with Shareholders- Voting by Poll- Voting by Poll

• Inform shareholders about procedure for Inform shareholders about procedure for voting by pollvoting by poll

• Ensure proper compliance to regulatory Ensure proper compliance to regulatory requirement about voting by pollrequirement about voting by poll

39


Corporate Governance is a dynamic process and is continually evolvingCorporate Governance is a dynamic process and is continually evolving

ANDAND

It has no boundaries or limits!It has no boundaries or limits!

40

Thank you!Thank you!

the 3rd icac symposium

Documents