Is the institution of the board of directors, which emanates from the 17th century, fit for purpose in today’s dynamic and complex business environment? A prominent line-up of speakers at the Institute’s eighth biennial corporate governance conference, will address this question and provide insights into the challenges facing the 21st-century board.
Companies around the world, despite all their differences in culture, political institutions, and business traditions, are governed by boards of directors. True enough, there are many varieties of boards – two-tier, single-tier, employee-elected or solely shareholderelected boards – but they are all recognisably the same institution.
Why is this so? Are there better ways to govern companies? Where did this institution come from? What measures are needed to ensure that the board operates effectively? These are just some of the questions that will be addressed by the Institute’s eighth biennial corporate governance conference which will be held 5–6 October. This month’s CSj gives you a preview of the key themes to be discussed and the all-important speaker line-up.
Dialogue over monologue
In keeping with previous years’ corporate governance conferences, this years’ forum has been designed to maximise the interaction between attendees, the speakers and panellists. For this reason, speaker presentations will be kept to a maximum of 20 minutes and each session will end with an extended panel discussion taking questions from the audience.
The liveliness of the open discussions that have been generated in previous forums is one of the great strengths of the Institute’s corporate governance conferences. Regular attendees of these conferences will be glad to hear that Peter Greenwood, Group Executive Director, Strategy, CLP Holdings Ltd, and April Chan, the Institute’s Immediate Past President, will be chairing the panel sessions this year. They can be relied upon to ensure that the Q&A sessions produce a lively exchange of views; that tough questions are posed to the speakers and panellists; that no evasions are permitted; and that the proceedings are well oiled with the lubricant of good humour.
The conference venue will also be equipped with an interactive voting system for attendees to vote on the key questions raised by the conference. This was an innovation of the 2010 conference and was highly popular with attendees. Instant polling enables the audience to engage with the proceedings more than is usually the case with forums of this kind and the poll results provide vital feedback for the Institute.
17th-century board – 21st-century businesses?
The first session of the conference will look at the board as we have inherited it from its 17th-century origins and ask whether it is still functional today. Clearly, a breakdown on the scale of the global financial crisis indicates a failure of companies’ governing bodies to ensure effective strategic direction and risk management – what can we learn from this debacle about how to improve the board’s effectiveness?
This session will also look at the Chinese board structure, especially the functions of the supervisory board, and at the experience of companies dually listed in Hong Kong and mainland China – how do they reconcile the different board practices in these two places? This first session will also discuss other board structures, such as hybrid board models.
The roles of the key players
The global financial crisis also focused renewed attention on the various roles on the board and the second session of the conference will look at ways to improve the effectiveness of the roles of the chairman, directors and the company secretary.
The role of the chairman.
The chairman clearly has a fundamental leadership role, but the conference will be asking what makes an effective chairman? What personal qualities are required and what principles should be established for the chairman to follow?
The role of directors.
Improving the effectiveness of directors has been a longstanding issue for regulators and market participants. The stock exchange’s recent changes to the Corporate Governance Code and associated listing rules in Hong Kong focused on ensuring that directors take an active interest in issuers’ affairs and give companies appropriate time commitments. There are, of course, numerous other issues to be discussed – does the board have the right balance of independent non-executive directors (INEDs) and executive directors? Are INEDs genuinely independent? Are board committees effective?
The role of the company secretary.
Company secretaries play a vital role in supporting boards of directors, both practically in terms of their administrative role in ensuring the board meets regularly, but also strategically in terms of the role the company secretary plays in advising the board on corporate governance matters. This role was given recognition in Hong Kong earlier this year when the stock exchange amended the Corporate Governance Code to highlight the role that the company secretary should play in board support and ensuring compliance with corporate governance best practices. The conference’s second session will discuss the company secretary role. Who should the company secretary report to? What qualifications are needed for the role? What differences characterise this role internationally?
The issue of board diversity has risen dramatically up the corporate and regulatory agenda in recent years. The third session of the conference will look at the benefits of better board diversity and the many issues it raises – for example, do quotas work? How can companies ensure a better diversity of board candidates through their director recruitment process?
The HKICS is working on a research report on this topic this year. ‘China Light and Power has kindly agreed to sponsor this year’s research into board diversity,’ says Mohan Datwani, the Institute’s Technical and Research Director. ‘The aim is to consider the report card of Hang Seng index constituents in terms of gender diversity. The HKICS is glad to collaborate with CLP as the topic of diversity is one that we propound. The Exchange, in its recent soft consultation on the topic, has also indicated that the market would be consulted on the topic of whether there should be a code provision in the Corporate Governance Code requiring listed issuers to address whether they have adopted broadbased principles for diversity.’
Join the board – you must be mad?
Companies will only get quality boards if they can recruit quality directors, but in the context of the rising accountabilities and liabilities of directors in recent years, what incentives, or perhaps more importantly, what disincentives are there for people to join boards? The fourth session of the conference will look at these issues. Should, for example, INEDs be subject to higher standards if they are members of the audit committee as some recent disciplinary actions in Hong Kong seem to indicate? Have we lost sight of the concept of the collective responsibility of board members?
What is the future of the board of directors?
The last session of the conference will look at the future of the board of directors. Despite the prevalence of this governance structure around the world, there is no reason why companies need to be run in this way. As companies become ever larger and more complex, will the board of directors be cast aside in favour of some other governance structure?
This session will also look at the role of technology, director training and the role of board evaluation. Board evaluation is still relatively uncommon in Hong Kong – are Hong Kong boards missing out on this opportunity to assess performance and make necessary adjustments to survive in an increasingly complex and challenging economic environment? How frequent should evaluations be? Should there be an independent or external evaluation periodically?
The Hong Kong Institute of Chartered Secretaries’ eighth biennial Corporate Governance Conference will be held on 5–6 October 2012 at the JW Marriott Hotel Hong Kong.
For conference inquiries, please visit the conference website at www.cgc2012.org.hk.