Since her re-election as President of The Hong Kong Institute of Chartered Secretaries (the Institute) last month, Gillian Meller FCG FCS discusses the work of the Institute to prepare its members for their expanded roles as governance professionals.
Could we start by discussing how the multiple crises impacting Hong Kong have impacted your first year as Institute President?
‘COVID-19 has dominated everything that we’ve done this year, both personally, professionally and from a business perspective. I would like to give full credit to the Secretariat for the speed with which it has managed to move all of our seminars and conferences online. At any other time, if you had suggested moving these events online, it probably would have taken us years to get there so I think the fact that we’ve been able to do this so quickly has been fantastic.
Moreover, we have actually seen an upturn in the number of members attending these events so I suspect that we’ll never go back to 100% in-person events. I think a hybrid model – where attendees join online but panel members and a small number of other people are able to attend in person, is the way forward for us. Always having that online attendance option makes sense since it is a lot easier for people to attend if they don’t have to travel.
There have been challenges of course. Last summer we had to work out how to hold annual general meetings (AGMs) in the middle of a pandemic. That affected us at the Institute, but it was also an issue for me at MTR because we generally have over 1,000 shareholders attending our AGM and they tend to be at the older end of the spectrum. In Singapore the government mandated proxy-only AGMs, but here in Hong Kong it was a little more difficult and we as an Institute really had to take the lead to coordinate discussions with the regulators and government. Eventually they agreed to put a 50-person limit on attendance at AGMs, or more if you could partition the venue into separate areas of 50 people, but that took quite a lot of pushing.
We also put a lot of effort into providing our members with really practical advice on how to conduct their AGMs. Maintenance of shareholder rights was key – the right to attend, to hear from the board and the management team, to ask questions and to vote – but at the same time companies wanted to avoid their AGMs becoming infection clusters.’
Do you think Hong Kong should permit virtual-only AGMs?
‘Personally I favour the hybrid approach. As a matter of fact, the Institute has called for this for years before the pandemic as part of global thought leadership. There is a benefit to being able to look directors and executive members in the eye and ask them questions face to face. Moreover, in Hong Kong those who want to attend in person can usually do so without having to travel too far, so going fully virtual would deny them that opportunity. But going forward having an option for people to log on and vote online is absolutely the way to go.’
What legacy do you think the crises affecting Hong Kong will have for businesses and the Institute?
‘I think there are already some immediate and very practical legacies, in terms of things like business travel and the use of online meeting applications, but I hope that there will also be longer lasting legacies. I think for example that COVID has helped to highlight a number of environmental and social issues. During the pandemic, the air has been better than at any time during the 16 years that I’ve lived in Hong Kong. People have also become more aware of the benefits of going outdoors. At a time when gatherings are limited and you can’t go for dinner with friends, being able to go into the mountains and hike has kept me sane.
I hope that this focus on the environment continues into the future, but likewise, from a social perspective, I think COVID has made people more aware who we need the most. We need the cleaners, the care home workers, the doctors and the nurses, of course, so issues like fair pay, a living wage, have come to the fore. Again, I hope that companies continue to think about these social issues going forward.
This all ties into the way that governance was moving in any case, which is more towards a purposeful and stakeholder-responsive governance model, but I think COVID has accelerated that shift. This is highly relevant for boards of directors and for us as advisers to the board as we are increasingly involved in weighing up competing stakeholder views and trying to decide what is the right thing to do.’
Do you think COVID may also have the opposite effect – in terms of companies paying less attention to environmental and social issues as they address the need to survive financially through the tough times?
‘I think people understand that, if you get these things right, they will actually add value to your business as opposed to just being a cost. There has been ample research showing that companies that take environmental, social and governance (ESG) issues seriously perform better financially.
Improving ESG performance in areas such as greenhouse gas emissions may reduce costs and a new environmentally friendly product may be an opportunity to generate additional revenues, but there are also the more intangible and longer-term benefits to consider, such as employee satisfaction or your social licence to operate. Public perceptions have changed – look at perceptions of tax avoidance for example. Schemes to reduce your tax bill (I’m not talking about tax evasion here, that is of course illegal), used to be regarded as a legitimate way to save money but, in recent years, there has been a backlash against them. There is a sense that companies should contribute back to society and that means paying a fair amount of tax in the jurisdictions in which you are doing business. Social media has exacerbated these kinds of reputational issues and now overnight a company’s reputation (and its value) can be seriously damaged.
So, as governance professionals, we’re no longer only being asked to advise on whether something is compliant from a legal or a regulatory perspective, but whether it is “the right thing to do”. And this can be a tough judgement call. Some have questioned, for example, the extent to which boards are legally permitted to take stakeholder concerns into account. I’m a real believer that the law does permit a broader stakeholder view. If you’re asking yourself what’s in the best interests of the company and the shareholders as a whole, it can’t be in the best interests of the company for you not to treat your employees fairly, or for you to have no social licence to operate from the local community. All these are requirements for sustainable business.’
Do you think that this transition in attitudes to compliance is well enough understood among governance professionals here in Hong Kong?
‘This is exactly what the Institute is trying to respond to with the proposed change in the Institute’s name and our new Chartered Governance Qualifying Programme (CGQP). The CGQP has brought in new subjects like risk management and boardroom dynamics to better prepare our members to be able to perform their roles. Compliance is obviously incredibly important and we have to get that part of our jobs right, but at the same time we are trying to prepare our members to really add more value to the companies they work for. That includes being able to help the board and the executive to take broader issues – such as ESG performance and reporting, sustainability, corporate purpose and culture, as well as stakeholder-led governance – into account. Whether it is through the provision of training to boards, or through the way board meeting agendas are put together, governance professionals can help to highlight the direction in which the world is moving and that it is in the best interests of the company for the board and executive to take this broader view.’
You mention that deciding on ethical issues can be a tough judgement call for directors and the governance professionals advising them – do you have any suggestions on how practitioners can address this aspect of their work?
‘I think the sense of what’s right and what’s wrong is perhaps not as difficult as we think. One test I use to assess whether a company is doing the right thing is the “front page test”. Ask yourself how people would respond if what you are doing were to be plastered over the front page of the newspaper tomorrow.
Another way to approach this is to think about what kind of culture the company should adopt. As advisers to the board, we have an important role to play in ensuring that the board considers what kind of culture is needed. This wasn’t on the board agenda a few years ago. Different companies will have different risk appetites, of course, and that’s absolutely right, but having a culture of transparency and openness has obvious benefits. If you look at corporate scandals you generally find that a lot of people knew what was going on and yet nobody spoke up. That destroys companies. What you want is a culture that gives confidence to people to point out wrongdoing without fear of retribution.’
You mention the Institute’s work to better prepare members for the governance professional role – can we discuss that work in more detail?
‘I think members will be aware that we launched our CGQP in January 2020 and that our members now qualify both as a Chartered Secretary and as a Chartered Governance Professional. This is really a reflection of the work that we are already doing since most of our members are performing, to some degree, both the more traditional company secretarial role, which is more about compliance with relevant laws and regulations, and moving into the realm of governance.
To me, the name change of the Institute is just a natural follow on from that. And again, it’s really a reflection of who we already are and what we already do. We were originally planning to hold a number of members’ forums last year to discuss the name change and to get members’ views. We have had to delay things slightly as a result of COVID, but we’ve used other opportunities to seek members’ feedback. In my recent “Fireside Chat” with Samantha Suen FCG FCS(PE), our then Chief Executive, in November 2020, we raised this topic and the feedback we got was very positive – participants understood the reason for the name change and were very supportive of it.
We will continue these types of soft consultations and, as soon as we are able, we will hold our planned members’ forums. I should add that we have also been talking to regulators and they are supportive of the direction we are taking.’
Do you have a preferred option for the new name of the Institute – one issue for example is whether to try to include both the ‘Chartered Secretary’ and ‘Chartered Governance Professional’ elements of the new designation?
‘To me, governance is enough because that really encompasses both the compliance aspects and the broader governance aspects of what we do. So “The Hong Kong Chartered Governance Institute” would be an all-encompassing title. I think it’s important for the Institute and for our members to stand our ground – to make ourselves known as the professional Institute driving best practice in governance in Hong Kong and the Mainland. This will broaden our scope and provide more opportunities for our members going forward.’
Finally, what should we be looking out for in terms of the Institute’s work in the second year of your Presidency?
‘There are a couple of things I would like to mention, in addition to the name change, that we will be working on in the next 12 months. One is developing our thought leadership around purposeful governance. Corporate purpose and culture, along with ESG issues, sustainability and stakeholder-led governance, have been increasingly prominent topics in our research, advocacy and professional development work, and we want to increase the understanding of how all of this fits together.
My view is that, as a company, you have to understand your purpose and that goes beyond the Milton Friedman notion that a company’s purpose should be to make a profit for its shareholders. Of course, you have to be profitable to be financially sustainable in the long term, but why do you exist as a company?
At MTR we recently adopted a new purpose statement of “keep Hong Kong moving”. I think once you understand your purpose, that then enables you to think about who your key stakeholders are in terms of delivering on that purpose. You then need to understand what issues are material to those stakeholders and to your business, and then seek to balance those interests and make sure that you’re delivering value for all of those stakeholders.
So we will be focusing on bringing together these various strands to help people understand what all of this means for governance frameworks, for the items that should be on the board’s agenda, and what it means for us as governance professionals advising and supporting boards. We will be sending out a questionnaire shortly with a view to producing a research report or thought leadership piece on purposeful governance.
The second project I would like to mention will be a thought leadership piece on gender diversity on boards in Hong Kong. Progress in this area has been lamentable and we lag behind peers in the region such as Malaysia and India. That is not smart business and also reflects badly on our governance standards. So we are looking to raise awareness of this issue and to explore what solutions might be possible, because the soft approach we’ve been taking as a city hasn’t worked.
Those are just two of the projects we have lined up for the coming year and I am sure we have a busy time ahead of us with the Institute’s ongoing projects, some of which we have discussed today. I would like to take this opportunity to say that I have thoroughly enjoyed helping the Institute navigate the challenges of the past year and I am looking forward to the work ahead.’