Hong Kong companies say HKEX is ‘micromanaging’ in its fix for overboarding, governance

Hong Kong’s publicly traded companies have come out to “strongly oppose” the plan by the city’s stock exchange to cap the number of board seats each independent director can take, and limit the duration of their tenure.

“A hard cap on the number of directorships does not [ensure] better [performance],” said Mike Wong Ming-wai, chief executive of the Chamber of Hong Kong Listed Companies, whose members include Sun Hung Kai Properties, Henderson Land and most of the largest companies on the Hong Kong exchange.

“A director may take on many directorships but can still contribute sufficient time and effort to serve,” Wong said in an interview with the Post. “It boils down to the integrity and discipline of the individuals. Directors are well aware of their duties and the consequences of failing them.”

Hong Kong has lagged behind other stock exchanges in tackling its “overboarding” problem. In Beijing, Shanghai and Shenzhen, concurrent INED positions are capped at three. The London bourse limits full-time executive directors to one board seat in a FTSE 100 company.

Singapore has mandated a third of the boards of all publicly traded companies to be composed of INEDs, each for up to nine years, from 2022. Malaysia also has a nine-year limit, with an absolute cap of 12 years implemented in 2022.

Hong Kong’s nine-year limit on INED tenure, starting in 2028, is “inappropriate”, tantamount to “micromanaging” by the stock exchange, Wong said.

“The longer the director sits on the board, the more the director understands about the business, [which can lead to] better advice,” he said. “There is no evidence of the purported benefit to listed companies. It will only limit the choice of INEDs and prevent companies from appointing the talent they think fit.”

Hong Kong’s asset managers and brokers supported the HKEX’s plan.

“The proposals will help enhance corporate governance,” said Katerine Kou, the chair of the Hong Kong Securities Association. “The cap is needed because the affairs of listed companies are complicated, requiring directors to spend sufficient time”.