Peter Greenwood FCIS FCS, former Company Secretary and Corporate Counsel of CLP Holdings and the winner of the HKICS Prize 2018, highlights the advantages of being a governance first mover.
Congratulations on receiving the Hong Kong Institute of Chartered Secretaries Prize 2018. Could we start by discussing your route into the Chartered Secretary profession – you started as a lawyer I believe?
‘Yes, I studied law because I came from a family that wasn’t particularly well-to-do. I could only go to university to study something that would lead me directly to a job. My dad used to say that he had never heard of an unemployed lawyer and had never met a poor lawyer. I was fortunate enough to study law at Cambridge and went from there into private practice – working for the law firm Lovells in London.
I went to Germany to study and spent some time with the army. The move to Hong Kong came when I visited my old law firm in London. I was down in London for a job interview on a Friday and, because the trains back home weren’t that frequent, I paid a visit to the Lovells office. They offered me a job in Hong Kong and I accepted on the spot. I started work two days later on the Monday.’
Did you transition to company secretarial work at CLP Holdings?
‘When I joined the CLP Group in 1995, I initially worked as Corporate Counsel. When the Company Secretary position became vacant, the CEO and the board preferred to fill the position internally. It is quite an intimate position in terms of the relationship you need to have with senior management and the board so there can be a bias towards internal appointment. Given that the company secretary role has a legal and compliance content, the head of the legal department was regarded as the most logical person to take up the job.
I was extraordinarily fortunate to have a very strong team of experienced practicing company secretaries led by April Chan. All I had to do was add a bit of legal background to an already strong corpus of corporate secretary expertise. The key really is to find a way of bringing together what you might call the ‘regulatory’ and ‘client’ aspects of the job. The former are increasingly complex and demanding and chiefly include compliance with the Companies Ordinance and the listing rules, and the latter are euphemistically and incorrectly called the ‘softer’ skills, such as managing the board and contributing to the effective governance of the business.’
You mention April Chan, who will be well known to readers of CSj as a former President of the Institute. In an interview with this journal, April has said that her job as your successor in the company secretary role at CLP was made easier because the corporate culture recognises the need for good governance – was that also your experience?
‘If you and I were sitting at this table 25 or 30 years ago, the expression “corporate governance” would have been used seldom if at all. Now it is probably the most used phrase when reflecting on what the company secretary does and is so much at the heart of what we do that it is going to be in the name of our Institute. It was apparent to us at CLP from the late 1990s onward that the importance of corporate governance was going to grow enormously in the years ahead. We were among the first listed companies, if not the first listed company, to adopt our own corporate governance code. In fact, we had a governance code before the listing rules required one. When the stock exchange introduced the first governance code in Hong Kong, we were grateful for the flexibility to maintain our own code. We were also fortunate in the support of CLP’s chairman, board and CEOs whom I served – all of whom quickly and readily committed themselves to a move to enhanced corporate governance standards and practices.
Of course, we were also influenced by the overall business context and developments in the West. It wasn’t difficult to foresee that the first corporate governance codes in the UK would gradually find their way to Asia in one form or another. We also had positive reactions from shareholders and stakeholders which encouraged us to continue to be an early adopter of practices such as the disclosure of director remuneration. We consistently found that there were advantages of moving early in advance of the broader tide of governance regulations.’
Over the course of your career there has been a broad shift from a shareholder to a stakeholder orientation in governance – what do you think are the implications of this for governance professionals?
‘This has at least two major implications for governance professionals. The first is that governance expertise and discipline will be required in any significant organisation, irrespective of whether it is a listed company, a non-listed private company, an non-governmental organisation, a state-owned enterprise or a public authority. The need for governance will extend, as it has already, to a much wider spectrum of economic and social activity. So the scope for our profession, the ground on which we will be able to deploy our skills, is going to expand.
The second thing is that the nature of the skills we will have to possess as governance professionals will continue to grow. When people like me started in the profession, we could say the core skills were minute taking, board meeting preparation and statutory filings. To some people the job might still be defined in those terms, but the job has gone way beyond that and will continue to travel even further beyond that.
We now need to have expertise in risk management, for example. One of the major outcomes of good governance should be the effective identification and management of risk. As governance professionals, we therefore need to understand the risk that exists in the organisations we work for, and play our part in ensuring that systems and controls are in place to identify and mitigate those risks.
But the role is not just about rules and regulations, it is about the way people work together and about contributing to the relationships within an organisation. So, for example, the revised qualification syllabus is going to contain a much stronger emphasis on things like board effectiveness and director remuneration. The education of the profession now requires a much better understanding, not just of what constitutes good governance, but of the underlying drivers of good governance.’
Do you think there will be more emphasis in the future on the need for members of the profession to think independently – particularly when questions of ethics arise?
‘That requires a number of things to be done successfully, some of which are already in hand. The first is clearly is that the nature of the profession itself must be understood better by those who deal with us. In that respect the repositioning of the Institute as a “governance institute” is a valuable step in the identification to outsiders of what we actually do.
The second thing is that the Institute has to continue to be a strong, authoritative and convincing voice in the discussion about governance issues. If our individual members have the backing of a better understanding of what their profession actually does, and a sense that they belong to a well-recognised and respected organisation in the form of the Institute, that will set them on the path to be a more credible voice within the senior management of the organisations where they operate. To that you have to add education, both initial and continuing, which is relevant to the needs of the profession and allows individuals to speak with authority and confidence on the topics that cross their desks. We have to be masters of the subject.’
There are still major differences in the governance systems of Hong Kong and Mainland China – does that present challenges for members of the Institute?
‘Good governance will not always take the same form across different political backgrounds. I think this issue is less about the core principles of governance, which are pretty much the same, but more about the way in which governance is enforced, encouraged and applied. There has been convergence in governance standards but divergence in the way in which those standards are enforced and by whom. In markets and countries with a free, open and robust press, one of the heaviest sanctions on poor governance is media criticism – and it can be an immediate, brutal and severe sanction. If you don’t have a free press or a strong and independent legal system, you need to replace these with something that ensures good governance is enforced and bad governance deterred.
You have to understand what good governance is and then reflect on how that can be best promoted and achieved within the overarching political context. You have to be open-minded because otherwise you are pre-supposing the existence of a governance regime which can only operate in a Western liberal democratic setting and that cannot be an answer with which any of us should be satisfied.’
Do you think public sector organisations should be held to the same standards of governance as listed companies – particularly in terms of the degree to which they are transparent and accountable?
‘Firstly, it is extremely difficult to have good corporate governance if you have poor public governance. It is possible, but it is much more difficult. Secondly, it cannot be right for private sector enterprises to be expected to govern themselves more effectively than public sector enterprises. Throughout Asia, and in Hong Kong itself, significant elements of the economy that affect people’s daily lives – transport and health for example – are in the hands of the public sector, but you would not always say that the governance of those enterprises, authorities or statutory bodies has been the shining example that it might have been.
The third thing is that good governance in listed companies used to be considered the price you pay for access to public money. Once you move to the premise that listed companies have duties to a wider stakeholder group – customers, the community and the environment as a whole – then it seems to me that there should be little difference between the standards required of non-public companies and those of publicly listed companies. Especially when private companies often have more employees, serve more customers, work in more diverse markets and have bigger environmental footprints than listed companies. We are seeing across the world that the number of listings is declining very substantially, so if you are only regulating in governance terms for listed companies, you are increasingly swinging at a diminishing target.’
What’s your view of the initiatives promoted by The Institute of Chartered Secretaries and Administrators (ICSA) to increase the recognition of the centrality of governance to the profession?
‘With regard to the repositioning of our profession, there is no doubt that ICSA can play a very substantial and valuable role. Companies carry on international businesses, investors come from across the world and it’s really only the ICSA which can promote the understanding of our profession at the international level. Individual divisions can do that within their own markets, but only ICSA can transcend those individual markets and help the profession achieve a much wider global recognition.
So it’s entirely proper and timely that ICSA should be proceeding with the repositioning of the profession and the change of name of the ICSA to “The Chartered Governance Institute”. But that rebranding shouldn’t just be a change of name, we have to backfill it with real substance and that process has started with the revised educational requirements for joining the profession.
The ICSA also needs to become more relevant to individual members. Governance professionals around the world face similar challenges and the ICSA is building an information resource – for example the publications generated by the ICSA Thought Leadership Committee – accessible to governance professionals wherever they are. Whenever individuals are faced with a particular challenge or question, they can now access not just the knowledge-base of their own institute but a global information base.’
What advice do you have for new recruits to the profession?
‘I think we can say to them with confidence that the need for their skills has never been greater and the recognition of that need has never been more widely held. We can say with equal confidence that the dimensions of the job are expanding at a rate unparalleled in the history of the profession. That means that the demands on young governance professionals will be greater than those borne by their predecessors, but equally the rewards, whether tangible in terms of remuneration or intangible in terms of job satisfaction, will be much higher than in the past. There has never been a better time to become a company secretary.’