The Institute’s latest Corporate Governance Conference highlighted the ways in which governance professionals can help future-proof the organisations they work for.
The first part of our CGC 2018 review looked at how the context within which businesses operate has changed dramatically. Not only are companies being held to higher stakeholder expectations, they also need to adapt to the disruptions and transformations brought about by emerging technology. But what will be the impact of these changes on governance professionals working in Hong Kong? As you might expect, this proved to be a recurrent theme in the conference.
With opportunity there comes risk and from the perspective of 2018 there is an unusually high level of both in the years ahead. Andrew Weir, Senior Partner, Hong Kong/Vice Chairman, KPMG China, and a speaker in Session One of the conference, presented a slide showing the ‘Global Risks Interconnections Map 2018’ from the World Economic Forum Global Risks Perception Survey 2017–2018. The map not only highlights the major future risks for businesses – such as climate change, growing social instability, growing cyber risks, loss of biodiversity and ecosystem collapse – it also gives a graphic representation of the interconnectivity of these risks. Mr Weir warned that companies will need to adopt a more holistic approach to risk as a result.
He also discussed the implications of this for governance professionals and more specifically company secretaries. He pointed out that ‘conduct, character and culture’ will be at least as important as profit in the future and this will increase the importance of the gatekeeper role of the company secretary. ‘This raises the bar on what professionals need to bring to the table. Having the company secretary at the forefront of debate and challenging the board is what we need,’ he said.
Adapting to change
The approaches of different age groups to change was also a recurrent theme of the conference – do younger people have an advantage when it comes to adapting to the transformative changes affecting the business environment?
The first speaker in Session Four, Cindy Chow, Executive Director, Alibaba Hong Kong Entrepreneurs Fund, highlighted the fact that many millenials in Hong Kong have the adaptability to change that is essential for an entrepreneurial career. She pointed out that, as automation extends further into the market, creativity and entrepreneurship are the key skills driving success for companies. The Alibaba Hong Kong Entrepreneurs Fund (AEF) was set up to nurture entrepreneurs in Hong Kong by funding promising start-ups that need capital to get their ideas to market.
The disruption of traditional business models by new technologies is opening up new opportunities for anyone with the right combination of creativity, entrepreneurship, adaptability and courage. ‘Even problems can be an opportunity,’ Ms Chow pointed out. She cited the example of Gogo Van – a delivery service launched in 2013 in Hong Kong. The idea came to one of the founders when he was trying to launch a different business for which he needed a reliable delivery service. The difficulty he had trying to hire a van prompted him to look into starting an app-based delivery van service in Hong Kong. Gogo Van has now expanded to Singapore, Mainland China, Taiwan, South Korea and India.
Ms Chow added, however, that launching a new start-up continues to be regarded with some suspicion as a viable career choice by parents in Hong Kong. Research by the AEF indicates that only 18% of company founders believe parents encourage an entrepreneur career and only 28% of students believe that their family would support them to pursue an entrepreneur career.
So do companies have something to learn from millennials? The second speaker in Session Four, Ann Kung, Deputy Chief Executive, Bank of China (Hong Kong) Ltd, emphasised that the openness to change of the younger generation will be a major advantage in the current business environment in Hong Kong. ‘It is a will rather than a skill,’ she added.
New technologies such as e-payments and robo-advice are transforming financial services, and there has been an increasing collaboration between tech companies and the traditional banks. For example, the use of open APIs (application programming interfaces) enables third-party developers to build applications and services around financial institutions.
‘I’ve been in the banking industry for 28 years, but I am seeing the biggest change in my entire career,’ Ms Kung said. While the attitude to change of the millennial generation is certainly an asset in this environment, she pointed out that teams still need professionals with training and experience to ensure the requisite due diligence is performed. ‘While the mode of delivery is changing, the need for due diligence is the same, so banks will need both younger and older members on their teams,’ she said. ‘This is an exciting time… conditions exist in Hong Kong for banks to rise to the next level.’
A fresh perspective
An innovation of this year’s CGC was the concluding dialogue between Keynote Speaker Professor Mervyn King, Chairman, International Integrated Reporting Council, and two younger members of the profession in Hong Kong – Rachel Ng ACIS ACS, Company Secretarial Manager CLP Holdings Ltd, and Ada Au, Company Secretarial Officer, Jardine Matheson Ltd. In the context of the above discussion of the generational differences relevant to adapting to change, the dialogue enabled younger voices to be heard on the topics which will define the work they will be doing and the lives they will be leading decades from now.
Ms Ng emphasised the need for governance professionals to understand and anticipate the world we are moving into. The governance professionals of the future will need to be much more than specialists in regulatory compliance, she suggested, since they will need to advise boards on everything from virtual shareholder meetings to social media risks. ‘We can’t just be a follower of trends. Stakeholder demands are changing all the time and company secretaries need to remain alert to their expectations,’ she said.
Ms Au emphasised the importance of adaptability and curiosity in governance professionals. If practitioners can remain open to new ideas and curious, they will be able to bring a fresh perspective to issues and be a better guide to the companies they work for, she said. In this sense, ‘governance professionals, and in particular company secretaries, can be pioneers of change,’ she added.
Summing up, Professor King said that company secretaries will have an important part to play in the transition to a more sustainable business culture. ‘The role of the company secretary,’ he said, ‘is to test the board the whole time.’ There needs to be a constant questioning, he added, of how the company has made its money in the past and how the company will make its money in the future – in particular will it be a value-creation process in a sustainable manner?
The Institute’s Corporate Governance Conference 2018 was held at the JW Marriott Hong Kong on 14 September 2018.
SIDEBAR: Guest of Honour’s speech
In keeping with the tradition of the Institute’s CGCs, the latest conference adopted an international scope in its discussions, but it also ensured that the local implications of the issues discussed were addressed. The CGC 2018 was fortunate to have high-profile speakers to update the audience on the evolving governance landscape in Hong Kong.
First to the podium was Guest of Honour James Lau JP, Secretary for Financial Services and the Treasury, The Government of the HKSAR, who updated the audience on recent initiatives to position Hong Kong as a regional hub for green investing. He also addressed Hong Kong’s new listing regime, which came into effect on 30 April 2018. This regime allows high-growth and innovative companies to list with a weighted voting rights (WVR) structure on the main board of the Stock Exchange of Hong Kong. Mr Lau focused on the investor protection safeguards built into the new regime. ‘Hong Kong is the first jurisdiction to have a regulatory regime for WVR’, he said.
The audience also heard from Ada Chung, Registrar of Companies, on the recent review of the Companies Ordinance. She also discussed the new initiatives to enhance the transparency of beneficial ownership of Hong Kong companies. The Companies (Amendment) Ordinance 2018 requires companies to maintain a significant controllers register (SCR) containing information on the persons who have significant control over a company for inspection by law enforcement officers upon demand.
In addition, she discussed the recent initiatives to tighten regulation of trust or company service providers (TCSPs) in Hong Kong. The Anti–Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Ordinance 2018 extends statutory customer due diligence and record-keeping requirements to solicitors, accountants, estate agents, and TCSPs. It also requires TCSPs to apply for a licence from the Registrar of Companies.
The Guest of Honour’s speech is available online at: https://www.fstb.gov.hk/fsb/ppr/press/c_speech.htm.