Amar GillandLake Wang

Opinion | Are Hong Kong companies ready for truly independent boards?

HKEX’s proposals to strengthen the independence of corporate boards are a welcome advance but more must be done to improve governance

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People walk on a footbridge in Central, Hong Kong’s financial district, on June 18. Photo: Jelly Tse

Amar GillandLake Wang

Published: 4:30pm, 11 Sep 2024Updated: 6:06pm, 11 Sep 2024

The high-profile collapse of China Evergrande and Country Garden’s struggle to stay afloat share a notable but often overlooked similarity. Both companies’ independent directors were excessively tenured, having served on their boards for up to 13 and 16 years.

One of their independent directors was a prolific board member, sitting on 18 listed company boards. With relaxed standards on independence, it is doubtful that these boards’ lack of sufficient oversight was a mere coincidence.

It is thus timely that Hong Kong Exchanges and Clearing (HKEX) has put forward proposals relating to independent directors in a recent consultation to advance corporate governance standards in the market.

The consultation includes proposals for a lead independent non-executive director, and capping the tenure and directorships held by these directors. Other proposals are aimed at increasing board diversity and improving risk management.

Investor members of the Asian Corporate Governance Association firmly support these proposals. Indeed, we believe HKEX could go further to strengthen board independence in the interests of all shareholders.

In Hong Kong’s close-knit business community, the family business culture is strong. Affiliated relationships and loyalties are common. Controlling shareholders of companies effectively have a veto on who might come on the slate of potential directors.