CGj talks to Ellie Pang FCG HKFCG, Institute Chief Executive, about her own journey, and that of the Institute and profession, to the new home of governance.
Could we start by discussing your personal and professional background?
‘I was born in Beijing and came to Hong Kong when I was 10 years old. I did my secondary schooling in Hong Kong and then went to England to study for A levels and university. When I came back to Hong Kong, I worked for 11 years as a litigation lawyer and then joined Hong Kong Exchanges and Clearing Ltd (HKEX) as an enforcement lawyer.
After a year in enforcement, I found that I preferred to do policy work so I transferred to HKEX’s policy team. I was involved in some major Listing Rule and Corporate Governance Code (the Code) changes in the 14 years that I was with HKEX, so I've seen many changes in the way that corporate governance and the Code are viewed by listed companies in Hong Kong. When I started, many listed companies regarded the Code as being just about writing a corporate governance report at the end of the year. As corporate failures have become a lot more prominent, and with greater awareness and demands from investors, especially institutional investors, the importance of good governance has been much better understood and a lot more attention is now paid to this area.
Investor and stakeholder concerns, in particular environmental, social and governance (ESG) issues such as climate change and board diversity, have also received more attention. I was involved in the drafting of HKEX’s ESG Reporting Guide and its subsequent upgrades. In fact my last project at HKEX was drafting the consultation and conclusions of the latest upgrade of the ESG Reporting Guide.’
What attracted you to policy work at HKEX?
‘One of the most enjoyable things for me was the research involved – looking at best practice internationally and then drafting updates to Hong Kong’s Listing Rules and the Code to see how far we could push the envelope. I found it specially gratifying to be able to make an impact and shape the market by bringing international best practice to Hong Kong. On board diversity, for example, my research and the resulting public policy papers have been widely cited by proponents of board diversity. I’m pleased to see that the consultation conclusions, published by HKEX last month, will most likely eliminate single gender boards by 31 December 2024. Listed companies with a single gender board will have three years to appoint at least one director of the missing gender and failure to do so will be a breach of the Listing Rules.
Over the last decade, we have seen the number of boards of Hong Kong listed companies without a single female director go from about half to a third (just over 800) of the total of around 2,500 companies. That is still not good of course, but, as a result of years of work by HKEX, the Institute, many NGOs, investors and business leaders, board diversity is now an issue that boards know they need to address.
Another aspect of my policy work at HKEX that I enjoyed was explaining to people the benefits of better governance and ESG standards. Ultimately, of course, you cannot attract capital into Hong Kong without good standards of governance and ESG, and you need liquidity for the market to be successful. I enjoyed giving seminars and talking to listed companies about the rationale behind policy changes at HKEX. I also did a lot of work with the Institute, talking to its members both in Hong Kong and the Mainland about corporate governance, ESG and regulatory policy. That was how I became close to the Institute before I took on my present role.’
Do you think it’s important for governance professionals to understand the policy issues behind Hong Kong’s regulatory framework?
‘Yes. The work of a governance professional is not a back office job, it's more about what goes on in the board room. The need for the board to address governance and ESG issues is much better recognised now and our members are the key advisers to the board on these issues. Of course, there is a wide spectrum of roles within governance and some of our members are more involved in company secretarial administrative work, but increasing numbers have risen to become senior managers. I hope that, with our Institute’s new name and our members’ new professional designation as Chartered Secretaries and Chartered Governance Professionals, we can persuade more company secretaries to come out of their comfort zone and get more involved in higher-level governance matters. This continues to be a focus of our education and CPD services.’
How should Institute members prepare themselves for their roles as governance professionals?
‘The Listing Rules and the Code make it clear that company secretaries are key governance advisers to the board and are responsible for updating the board on the latest laws and regulations relevant to the company. Not only that, since July this year, company secretaries are categorised as senior management and can be held accountable for corporate governance failures. So the role can no longer really be seen as purely an administrative one – regulators expect our members to step up their game because they need the help of governance professionals to guide and facilitate the training of directors. Governance professionals need to be governance experts in order to effectively guide the board.
Our qualifying programme equips our members to become competent governance professionals, but, as you know, corporate governance is an evolving landscape so CPD is also hugely important. We run about 100 CPD seminars per year and they are very well attended. Moreover, some of our members also go to CPD events organised by the accounting and legal professions. Attending CPD events should not just be a matter of accumulating the required CPD points, though; it is a crucial way for our members to keep up to date with developments relevant to their company and to be able to advise the board knowledgeably.
This goes beyond advising on the latest developments in law and regulation. Governance professionals also need to be familiar with areas such as stakeholder engagement, ESG, and organisational purpose and culture. In its thought leadership work, our Institute has been promoting best practice in these areas. We are fortunate to have many brilliant practitioners who are thought leaders in these areas within our Institute's membership and we fully utilise this – they help shape the thought leadership papers we produce and share their expertise at our CPD events. But I would urge members to let us know if there are any areas of training that we're not currently providing that would be useful to them. We're here to provide the services our members need and the success of our CPD programme means that we can bring in the best speakers in the market in Hong Kong and internationally – people are very willing to speak for us.’
You expressed the view that Hong Kong should reduce its reliance on the current rules-based approach to corporate governance regulation. What’s your view of the argument that the rules-based approach has the advantage of greater clarity?
‘That is true but, right now, I think we've gone too far towards the rules-based approach. Globally the trend is towards the principles-based approach and Hong Kong is unusual in having a corporate governance code with so many comply or explain provisions. This is totally against the original intention of having a corporate governance code, and with every review we add 10 or 15 more provisions. If we are not careful, the Code will start to lose its meaning.
For listed companies, and the governance professionals advising them, it is easier to take a box-ticking approach to Code compliance. Taking a principles-based approach requires a lot more thought and board involvement. But while that may be harder, the benefits are huge. Explaining how you've complied with the principles of the Code in your corporate governance report gives you a lot more scope to shine. Analysts and investors, especially institutional investors, do rely on companies’ corporate governance reports, so your report is your brand – a demonstration of how good your governance standards are. Investors and stakeholders are unlikely to look at your corporate governance report and decide that you have good corporate governance on the basis that you have ticked all the required boxes in the Code.’
The Institute has positioned itself as the natural home for all governance professionals, whatever their training and background. How will this affect the Institute's work in the years ahead?
‘I think our Institute’s new name, together with our members’ new designation and post-nominals, will help us expand our membership, attracting people in different roles and fields. Anyone interested in becoming more conversant with governance and ESG matters is welcome to join our membership. We are attracting high-calibre people with very high professional standing in Hong Kong. They are at the top of their game and, in addition to helping us shape our thought leadership work as I mentioned earlier, they also provide valuable role models for anyone who aspires to join our Institute.
The roles of our members have naturally evolved. Directors need advice on regulatory changes, as well as governance and ESG matters, and the most knowledgeable person in the room is the governance professional – whether that individual is a company secretary, a lawyer or an accountant by training. So the role has already evolved to become the governance adviser to the board, all we have done is to change the name to match that change in role.
For our Institute, the name change highlights the fact that we promote a global “gold standard” in corporate governance. That standard is maintained by the Professional Standards Committee (PSC) at the global Institute – The Chartered Governance Institute (CGI). The routes to qualification provided by the divisions of the CGI have to have the PSC's approval and that gives an assurance that we have a common standard across all nine divisions. This provides transferability of the qualification for members across all nine divisions and it ensures that regulators are happy with our members being the professional governance advisers to the board. It also gives assurance to companies and their directors – the employers who hire us – that the Institute provides a rigorous route to qualification and an equally rigorous CPD training programme that we require members to attend.’
What advice would you give to fresh recruits to the profession?
‘Step up your game. That means getting the usual CPD training of course, but not just to accumulate the required CPD points – what you learn is going to help you shine in whatever role you are in. I would also recommend that they join our mentorship programme. We have a very good mentorship programme where experienced senior members of the profession help junior recruits. Finally, I would also urge them to give us suggestions on how the Institute can better serve them and get involved in the Institute's work. Join our panels and committees and make your voices heard.’