ESG reporting is a company’s open disclosure of its environmental, social, and governance performance and practices in the form of a report. Its goal is to give stakeholders information about the company’s sustainability efforts and ethical operations, emphasising its commitment to risk management and sustainable development. Transparency is highly required to demonstrate a company’s commitment to ethical procedures, as it improves its reputation, and ensures its long-term financial stability. Businesses in Hong Kong and throughout the world may use such reporting along with to demonstrate a proactive approach to tackling relevant ESG risks and opportunities while also meeting regulatory criteria and stakeholder expectations for sustainable business practices.

While both sustainability and ESG are regularly interpreted as entailing the same meanings, they differ significantly. Sustainability is a universal term that, in general, can refer to a business’s relationship with the environment; ESG, on the other hand, expands that relationship to encompass social responsibility and measures to combat corruption.

ESG acts as a framework or yardstick for external investments, allowing businesses to share their activities and investors to evaluate the risk and performance of the business. In contrast, sustainability is thought of as an internal structure that directs a business’s capital expenditures. While the organisation’s actions are motivated by sustainability, and their reported results are reflected in ESG.

Given that ESG is primarily a reporting framework, it holds greater relevance for publicly traded companies that seek to attract investors, as well as any business looking to secure financing opportunities. It provides a means for companies to demonstrate their commitment to ESG principles and helps investors make informed decisions.

Tina Thomas

Head of Environmental, Social and Governance

E: [email protected]

T: +852-2598 5234

Performance shares represent a form of stock-based compensation awarded to employees. These shares are contingent on meeting certain performance benchmarks that align with the company’s strategic and financial objectives. Typically part of a long-term incentive plan, performance shares vest when employees successfully meet or exceed these pre-defined goals. This practice, widely adopted by companies listed on the Hong Kong Stock Exchange, effectively merges employee rewards with the company’s overall performance. In a market known for its competitiveness, this approach of leveraging performance shares serves as a key strategy for fostering sustainable business growth and aligning employee efforts with shareholder value.

Jason U

Managing Director Asia, Share Registry Services and Employee Plans Services

E: [email protected]

T: +852-2598 5234

Regulatory compliance is one of the most complicated, time-consuming aspects of running a business but also one of the most critical. Companies who fail to prioritise corporate compliance may face fines, lawsuits and reputational damage.

“It is the duty of a competent company secretary to facilitate and ensure regulatory compliance and to release your company from the compliance burden so that your executive staff can concentrate on growing the business,” explains Esther.

With Hong Kong authorities now demanding a high standard of corporate governance from local companies, the support of a qualified company secretary is invaluable.

“In Hong Kong, the dual qualification of Chartered Secretary & Chartered Governance Professionals was launched in 2019. A qualified company secretary who possesses a high level of professionalism, competence and communication skills plays a crucial role in assisting organisations in upholding the high corporate governance standards. Among the large organisations and the listed companies, we’re seeing a greater focus on the internal controls and policies companies have in place to ensure corporate governance work is carried out properly,” says Esther.

Esther Choy

Head of Corporate Secretarial for BoardRoom Hong Kong

E: [email protected]

T: +852-2598 5234

In Hong Kong, the Employment (Amendment) Ordinance – known as the 713 Ordinance – sets out the rules by which businesses must calculate the statutory entitlements of employees. The purpose of the ordinance is to ensure employees of all types are appropriately compensated for their work.

The eight key statutory entitlements identified in legislation are:

• holiday pay;
• annual leave pay;
• sickness allowance;
• maternity leave pay;
• paternity leave pay;
• end-of-year payment;
• payment in lieu of notice; and
• amounts to remedy unreasonable and unlawful dismissal.

“Employers should comply with the 713 Ordinance and calculate statutory entitlements on a 12-month average wage basis,” Miles says.

Correct calculation of wages for individual staff members is crucial to avoid incorrect statutory entitlement figures.

The legislative landscape in Hong Kong is unique and constantly changing. A significant amendment was made on 1 May 2023, when the region’s statutory minimum wage rate increased by 6.7% to HKD40 per hour.

Changes to payroll legislation can be very technical and may only impact a few employees in select industries. For example, in April 2023, the Hong Kong Legislative Council passed the Occupational Safety and Occupational Health Legislation (Miscellaneous Amendments) Bill 2022 (“the Bill”). This Bill amended the Factories and Industrial Undertakings Ordinance (Cap. 59), the Occupational Safety and Health Ordinance (Cap. 509), and their subsidiary legislation. The Bill seeks to increase the overall maximum penalties for occupational safety and health (“OSH”) offences to enhance their deterrent.

To maintain ongoing compliance with payroll regulations, businesses must be proactive about staying up to date with changes and adjusting internal processes accordingly.

One way the Hong Kong government drives a high standard of good governance in the corporate sector is by enforcing penalties for non-compliance.

“Companies who fail to adhere to payroll legislation can face legal scrutiny and potential litigation,” Miles says. “For example, if an employer wilfully and without reasonable excuse fails to pay wages to an employee when it becomes due, they are liable to prosecution and, upon conviction, to a fine of HKD350,000 and to imprisonment for three years.”

The government is also encouraging employees to report unfair dismissals or unfair employers, and recent high-profile underpayment cases have put the wider public on high alert for malpractice.

With all this in mind, businesses must take compliance seriously if they are to maintain the trust of key stakeholder groups, protect their reputation and minimise their risk of penalisation.

Ken Wong

Managing Director for Payroll for Asia

E: [email protected]

T: +852-2598 5234