The COVID-19 pandemic altered the business landscape of marketplaces worldwide. Adapting to continual uncertainty and change has been necessary for survival. However, as we enter a new age of economic promise, Asia-Pacific enterprises are taking a proactive approach to corporate governance in order to assure a bright future for themselves and the larger economy.
In this article, Samantha Tai, Regional Managing Director for Corporate Secretarial, outlines the significance of corporate governance in Hong Kong. She further discusses how leaders may build values-based governance procedures in order to achieve outstanding results. In addition, we look at how the company secretary may advise and execute best-practice corporate governance measures to full effect.
What is corporate governance?
The meaning of corporate governance at the organisational level is to achieve superior performance, behave with integrity and maximise value to stakeholders. Companies that adhere to corporate governance norms are more likely to satisfy company goals, attract investment and outperform their rivals.
Significantly, the adoption of group-wide good corporate governance reduces the possibility of wrongdoing and consequent punishment.
In Hong Kong, the Prevention of Bribery Ordinance (POBO) sets out provisions for the prevention of bribery and for purposes thereto and connected therewith. Through the introduction of new code provisions under the Corporate Governance Code as set out in Appendix 14 to the Main Board Listing Rules and Appendix 15 to the GEM Listing Rules, that came into effect on 1 January 2022, all issuers have to establish an anti-corruption policy. For this reason, “companies need to make sure they have adequate procedures in place”, Samantha says.
Corporate governance is not a legal necessity for all Hong Kong enterprises, but Samantha believes that its link with fiduciary obligation makes it a crucial investment for every leader.
“We open BoardRoom training sessions in Malaysia by discussing a director’s fiduciary obligation to the Commonwealth to always prioritise the best interests of the firm, minimise conflicts of interest and act in good faith,” she explains.
“In Hong Kong, fiduciary obligation is taken very seriously, with authorities taking action against directors who fail to fulfil their responsibilities – including independent directors.”
Successful corporate governance frameworks include the creation of customised policies and their subsequent execution.
The corporate secretary is normally in charge of this duty.
The role of company secretaries in promoting corporate governance
Historically, the corporate secretary was a primarily administrative role and held minimal influence with the board. Today however, as a member of senior management and a statutory officer, the company secretary now handles various critical obligations for the organisation.
Company secretaries act as a connection between the board of directors, senior management and the company’s stakeholders (including regulatory bodies). This is in addition to their role in administrating crucial undertakings such as minutes taking, secretarial compliance and also company incorporation. Other duties include utilising digital technology, such as board management and ESG software, to strengthen board and shareholder procedures and improve corporate governance. Furthermore, because they are well-versed in local laws, they can guarantee that corporate governance standards are established, followed and evaluated on a regular basis.
The present responsibilities of the company secretary, according to Samantha, are clearly defined in the Corporate Governance Guide for Boards and Directors.
“In Hong Kong, the company secretary’s views on corporate governance are sought since they attend all board meetings, are familiar with relevant regulations and understand compliance needs,” she explains. “They advise the board on corporate governance practices that must be implemented. This might be related to the board’s structure or the company’s rules and code of ethics.”
They also assist publicly traded corporations in demonstrating corporate governance in their annual reports, including any alternative means utilised to attain the same goals.
Company secretarial responsibilities have become so synonymous with corporate governance that the Institute of Company Secretaries in the United Kingdom and the Institute of Chartered Secretaries and Administrators in Australia have both rebranded to the ‘Chartered Governance Institute’, with other regions expected to follow suit.
In Hong Kong, The Hong Kong Chartered Governance Institute unveiled its new brand identity in Jan 2022. Aiming to reflect its unique position and critical role as highly qualified experts in corporate governance in Hong Kong and the Mainland China, and as the China Division of the Chartered Governance Institute, an international organisation with nine Divisions globally.
How to elevate your corporate governance
Good corporate governance will become increasingly crucial in the coming years, with regulators anticipated to issue new guidelines for both public and private companies. Organisations that maintain best-practice standards as they develop will be well positioned to seize new opportunities and fulfil market needs.
You may lead your organisation to better corporate governance by implementing the actions outlined below.
1. Obtain the services of a qualified company secretary in Hong Kong
The first step toward better corporate governance is ensuring that your company follows existing standards and best practices, notably those outlined in the Hong Kong Stock Exchange Limited’s Corporate Governance Code. This includes assisting companies to adopt the new standards when they come into effect.
“Because they must report to the stock exchange, publicly traded firms already require corporate governance,” Samantha says. “However, they must now guarantee that corporate governance is practised in all of their subsidiaries as well – regardless of whether the subsidiaries are also listed firms or headquartered in Hong Kong or elsewhere.”
To meet this criterion, an experienced company secretary would assist in the development of a group-wide corporate governance structure. A code of conduct would be included, as well as rules and processes for corporate governance issues such as whistleblowing, anti-corruption, board diversity and sustainability.
Company secretarial service providers are a popular choice for executives who want to know that they will receive expert advice that is specific to their organisation.
2. Develop detailed policies tailored to your needs
Despite Hong Kong’s relatively high corporate governance performance, corporate irregularities can still occur. Failure to achieve expectations is sometimes attributed to internal perceptions of corporate governance as a box-ticking process, with the resulting policies being insufficient in length and content.
Senior-level workloads can result in rapid copy-paste solutions.
“Corporate governance involves more than simply copywriting,” Samantha cautions. “As there are many tools available, it’s important to bring your relevant management team together to discuss corporate governance framework development”.
The most successful corporate governance policies:
- are comprehensive;
- represent the organisation’s values;
- are appropriate for the organisation’s industry and size; and
- outline how good governance is actively practised.
3. Implement integrated reporting
While it is critical to ensure that your corporate governance policies and yearly reports are up to date, effective governance cannot be accomplished simply with documentation. According to Samantha, integrated reporting will most likely become essential in the coming years.
“Integrated reporting is a method based on integrated thinking that communicates how a company’s strategy, governance, performance and prospects lead to value generation,” Samantha explains. “It gives your yearly report more weight.”
Rather than viewing reporting simply as a compliance exercise, embarking on an integrated reporting journey provides for improved employee engagement and value generation.
Because all members of an organisation play a role in achieving good governance, it is equally critical to spend time articulating the importance of corporate governance to board members and personnel. You may do this by demonstrating how corporate governance standards are valuable instruments for improving business performance rather than arbitrary duties that must be completed.
“Successful corporate governance is interwoven into the company’s day-to-day activities,” Samantha explains. “It’s not merely a compliance policy.”
4. Develop a corporate culture that prioritises ESG
Developing a corporate culture that prioritises Environmental, Social and Governance (ESG) can significantly elevate a company’s corporate governance. By integrating ESG considerations into business strategy, decision-making processes, and daily operations, you can demonstrate a solid commitment to ethical and responsible practices.
According to Samantha, corporate governance issues are often overlooked by many CEOs due to their focus on navigating a challenging economy.
Regulators are urging increasing board engagement in ESG efforts in the interests of top-down corporate governance, with country-specific compliance requirements changing on a regular basis. Board directors are better placed to account for ESG risks and make choices that increase shareholder value. As a result, more emphasis is placed on developing a complete ESG strategy that benefits not just the organisation, its shareholders and the environment but also its employees. This leads to long-term financial performance and value creation for all stakeholders.
Prioritise good corporate governance
The strength of your corporate governance policies, practices and structures in the coming years will determine your business’s immediate and long-term prosperity.
It is critical that your business’s board of directors and management team embrace its governance structure, but it is also critical that your company secretary steers its success. Choose a company secretary with diverse knowledge, strong ethics and exceptional communication skills for optimal results.
Having an expert company secretary handle your corporate governance frees up your executive team to focus on other essential business objectives such as digital transformation.
Contact BoardRoom’s corporate secretarial experts to learn how we can assist your company in meeting its corporate governance objectives.
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