sponsored by doing business in the asia pacific-examining the governance implications april chan
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2011 Annual Conference. Sponsored by Doing Business in the Asia Pacific-Examining the Governance Implications April Chan. Put your organisation’s logo here. “ Doing Business in the Asia-Pacific – examining the governance implications” – A practitioner’s perspective. April Chan - PowerPoint PPT PresentationTRANSCRIPT
Sponsored by
Doing Business in the Asia Pacific-Examining the Governance Implications
April Chan
2011ANNU
AL
CONFERENCE
Put your organisation’slogo here
“Doing Business in the Asia-Pacific – examining the governance implications”
– A practitioner’s perspective
April ChanPresident, The Hong Kong Institute of Chartered SecretariesPresident, Corporate Secretaries International AssociationCompany Secretary, CLP Holdings Limited
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This presentation covers:• Business Environment in Asia-Pacific
Region (focus on China and India)• Challenges to Corporate Governance in
China and India• Tackling the Challenges: a Company
Secretary’s perspective• Case Study: CLP Group
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• Asia-Pacific Region remains a diverse region, with a range of culture, economic, legal, and political systems.
Business Environment in Asia-Pacific Region
Table: GDP, Market Capitalisation, Listed Companies and Legal System in Asia-Pacific Region
JurisdictionGDP (2010)
(USD Billions, PPP)Market Capitalisation
(USD Millions)Number of Listed
Companies Legal System
China 10,085.71 4,027,840 2,063Civil Law
Traditions
India 4,060.39 3,228,455 6,586Common Law
Traditions
Korea, Republic 1,459.25 1,091,911 1,798Civil Law
Traditions
Australia 882.36 1,400,000 1,999Common Law
Traditions
Thailand 586.88 277,731 541Civil Law
Traditions
Malaysia 414.43 408,689 956Common Law
Traditions
Singapore 291.94 647,226 778Common Law
Traditions
Vietnam 276.57 30,325 290Civil Law
Traditions
Hong Kong SAR, China 225 2,711,316 1,413Common Law
Traditions
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Business Environment in China and India
• Concentrated shareholdings – Block holding by families in business house
and by individuals in entrepreneurial ventures
– Dominant and significant state-owned sector• Growing capital markets• Businesses transitioning rapidly to listed
status
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Concentrated Shareholding –Implications and Challenges on Governance
• Dominant shareholder, potential for:– Conflict of interests– Related party transactions– Excessive influence on board– Weakened separation of board and management– Unfair treatment of minority shareholders
• Significant SOE sector, leading to:– Insulation from market forces and disciplines– Status above applicable laws and regulations
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Growing Capital Markets –Implications and Challenges on Governance
• Short operational track record• Lack of long-term vision• No tradition of accountability to stakeholders• No tradition of commitment to transparency and
honesty• Shortcomings in legal and regulatory systems
and government commitment to demanding and enforcing good governance
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Business transitioning rapidly to listed status
– China; a Case StudyMoody’s Red Flags Report on China• Screened 61 rated Chinese entities to identify areas of governance
concern
Source: Red Flags for Emerging-Market Companies: A Focus on China issued by Moody’s Investors Services
Number of Red Flags TrippedTotal No.
of Issuers1 Short track record: Under 7 years of operating history 32 Short listing history: Under 3 years or private 183 Concentration of family ownership: 43
Major shareholding family control > 30% stake4 Change of senior management: Change of CEO/CFO 135 Significant related-party transactions 3
a) >10% of sales or 10% of cost of goods sold, or 3b) Receivables due > 10% of total assets 0
6 Major shareholder's private business: 13Existence of material business outside of issuer
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Tackling the Challenges: a Company Secretary’s perspective• Improve Board Performance
– Participate in establishment of proper and transparent nomination process
– Issue guidelines on independence, directors’ duties, etc.
– Update directors on regulatory changes timely
– Provide continuous development training for directors
– Introduce effective board performance evaluation
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Tackling the Challenges: a Company Secretary’s perspective (Cont’)
• Promote Good Corporate Governance– Establish Corporate Governance
Framework for adoption by Company– Recommend good corporate
governance practice to the Board which are applicable to the Company as a whole
– Participate proactively in establishment of Code of Conduct
– Contribute to the corporate governance debate/government and regulatory consultations
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Tackling the Challenges: a Company Secretary’s perspective (Cont’)
• Promote Transparency of Disclosure and Dialogue with Shareholders– Establish Shareholders’ Communication Policy– Fair and continuous disclosure – in policy and practices– Publish Annual Report/Interim Report/Quarterly Statements and
timely announcements– Hold shareholders’ visit programme to enhance shareholders’
activism– Annual General Meeting – Website– Shareholders’ hotline
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Case Study: CLP Group
• Incorporated in Hong Kong• Listed before World War II• Supply electricity to Hong Kong since 1903; Mainland expansion in 1980s; regional
growth from 1990s to Australia, Southeast Asia, Taiwan and 2000s to India• 34.87% owned by Kadoorie Family• No other substantial shareholder• Business centred in Hong Kong• Board and Management located in Hong Kong• Subject to public scrutiny in Hong Kong, due to nature of business• Growing scrutiny of environmental performance• Global Dow 150 Company• Dow Jones Sustainability Asia Pacific 40 Index Company• Hang Seng Index Constituent• Hang Seng Corporate Sustainability Index Constituent• Hang Seng (Mainland and Hong Kong) Corporate Sustainability Index Constituent• Well recognised as among the best in corporate governance in Asia
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CLP Corporate Governance Framework
Source: https://www.clpgroup.com/ourcompany/corporategovernance/framework/codespoliciesandguidelines/Documents/CLP%20CG%20Eng%20(Clean)%202009.pdf
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CLP experience – Jhajjar Project, India
• In 2008 CLP successfully bid for the greenfield development of a 1320MW coal-fired power station at Jhajjar in Haryana State.
• The basis of tendering was against the lowest tariff bid.• Station due for commissioning in 2012.
Governance Challenges
Bidding• Different laws, regulations and bidding procedures• Governance characteristics and processes of key
stakeholders – Coal India, India Railways, Haryana State Government, Domestics banks etc.
• Environmental governance – compliance or better
Development and Construction• Governance for safety• Governance for quality• Ongoing stakeholder interfaces• Evolving regulatory issues (e.g. visas for Chinese workers)
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Conclusion• Corporate governance in Asia-Pacific is facing a number of
challenges.• Raising the bar on corporate governance demands the
support of all internal stakeholders (shareholders, board of directors and management) and external stakeholders (regulatory and professional bodies).
• But we are the Corporate Governance Professionals – we can make a difference by:– Improving Board Performance– Promoting Good Corporate Governance– Promoting Transparency of Disclosure and Dialogue
with Shareholders
Thank You