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Corporate Governance Scorecard Project

Corporate Governance Scorecard Project. Organized by:-. Sponsored by:- HKIoD Corporate Governance Development Foundation Mr. Herbert H M Hui Mr. Peter S H Wong Executed by:- Prof Stephen Y L Cheung City University of Hong Kong. Research Committee. Coordinator

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Corporate Governance Scorecard Project

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  1. Corporate Governance Scorecard Project Organized by:- Sponsored by:- HKIoD Corporate Governance Development Foundation Mr. Herbert H M Hui Mr. Peter S H Wong Executed by:- Prof Stephen Y L Cheung City University of Hong Kong

  2. Research Committee • Coordinator • Prof. Stephen Y L Cheung (City University of Hong Kong) • Members • Dr. Aristotelis Stouraitis (City University of Hong Kong) • Dr. J. Thomas Connelly (Chulalongkorn University) • Dr. Piman Limpaphayom (Chulalongkorn University) • Ms. Lynda Zhou (City University of Hong Kong) • Research Assistants • Ms. Cindy Chen (City University of Hong Kong) • Mr. Justin Liang (City University of Hong Kong) • Mr. Sam Lam (City University of Hong Kong) • Mr. Sam Yang (City University of Hong Kong) • Mr. Simon Lam (City University of Hong Kong) • Ms. Sarah Wan (City University of Hong Kong)

  3. Research Methodologies I • Survey results based on publicly available information • HSI, HSHKCI, HSCCI, and HSCEI constituent stocks • Based on information disclosed in 2002 • 168 major companies are covered

  4. Surveyed Companies I (as at 9/2003)

  5. Surveyed Companies II (as at 9/2003)

  6. Surveyed Companies III(as at 9/2003)

  7. Research Methodologies II • Avoids subjectivity bias • Not dependent on companies’ willingness • However, not as rich as an internal assessment ... • ... and captures only what the companies released in public and their documentation • Written request was sent to individual companies. Only a few companies supplied us with information

  8. Objectives of Corporate Scorecard for Hong Kong Listed Companies Hopefully

  9. Consistency • Each company was rated by two different members • The overall results were cross-checked by academics

  10. Scorecard Followed The Five OECD Corporate Governance Principle • OECD is internationally recognized • HKEx guidelines comprehensively covered • 168 public companies surveyed

  11. PositiveCorrelation between Good Corporate Governance and Company Valuation MTBV

  12. Market Valuation (Tobin’s Q) by Corporate Governance Entry Quartile

  13. Strong Weak Corporate Governance Performance by Indices HSI (恒生指數) HSHKCI (恒生香港綜合指數) HSCEI (恒生中國企業指數) HSCCI (恒生香港中資企業指數)

  14. Strong Weak Corporate Governance Performance by Industries

  15. Strong Weak Corporate GovernancePerformance by Categories A: Rights of Shareholders (股東的權利) B: Equitable Treatment of Shareholders (對股東的公平待遇) C: Role of Stakeholders in Corporate Governance (利益關係團體在公司治理中扮演的角色) D: Disclosure and Transparency (公開與透明化) E: Board Responsibilities (董事會的責任)

  16. Rights of Shareholders (股東的權利) Improvements: • Improve the quality of Notice to Call Shareholders Meeting • Attendance of all Board members • AGM minute • any Q&A sessions? • any resolutions being solved? 84.49 27.79

  17. Rights of Shareholders (388)(股東的權利)

  18. B. Equitable Treatment of Shareholders(對股東的公平待遇 ) Improvements: • Provide rationale/ explanation for related-party transactions • Allow minority shareholders to influence the Board • To facilitate voting by proxy 93.33 63.33

  19. B. Equitable Treatment of Shareholders (762)(對股東的公平待遇 )

  20. C. Role of Stakeholders in Corporate Governance(利益關係團體在公司治理中扮演的角色) Improvements: • Disclose more details on the safety and welfare of its employees • Long-term employee incentive plan 100 41.67

  21. C. Role of Stakeholders in Corporate Governance (2388)(利益關係團體在公司治理中扮演的角色)

  22. D. Disclosure and Transparency(公開與透明化 ) Improvements: • Transparency in ownership structure • Quality of Annual Report • Basis of Board members’ remuneration • Operating risks • Communication with shareholders • Website’s contents 90.33 64.01

  23. D. Disclosure and Transparency (45)(公開與透明化 )

  24. E. Board Responsibilities(董事會的責任 ) Improvements: • A set of written corporate governance rules • Corporate vision/mission • The quality of the Audit Committee Report in the Annual Report • Attendance • Internal control • Management control, etc. 81.67 41.67

  25. E. Board Responsibilities (2)(董事會的責任 )

  26. Results • NOT finger-pointing exercise • Important input for policy-makers, companies, and the public • Score for individual companies will not make public • Feedback report can be obtained for individual companies

  27. Results • Market-to-book ratio (MTBV) was used as proxy for company’s market value • Positive and significant relationship between MTBV and CG Index was found • Number of executive directors has negative impact • The top 5 shareholders’ holding has negative impact • The inclusion in the MSCI has positive impact • Transparency index does matter

  28. The Top 10 Best Performing Companies (by alphabetical order) • Asia Satellite (1135) • Bank of East Asia (23) • China Mobile (941) • CLP Holdings (2) • HK & S Hotels (45) • HKEx (388) • HSBC Holdings (5) • Linmark Group (915) • MTR Corporation (66) • Vtech Holdings (303)

  29. ~ END ~

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