The Director: Lands of Contrast; Iain McCormick Compares Corporate Governance in New Zealand and Hong Kong
Byline: Iain McCormick
Hong Kong and New Zealand exist in sharp contrast in many ways. Compared to our 'green and empty land' Hong Kong is one of the most densely populated areas in the world with an overall density of some 6300 people per square kilometre. The majority of the population live in tightly-packed high-rise apartments, with much of the land reserved for open spaces and country parks.
That's just one measure of our differences. A wide raft of indicators reveal sharp distinctions -- everything from birth rates, to our relative performance on IMF 'rich lists', and our average quarterly GDP growth rates. So how do we compare when it comes to corporate governance?
I have worked with a number of boards in Hong Kong and New Zealand. They differ greatly on a wide range of dimensions. In New Zealand, for example, the founder is typically no longer involved in publicly listed companies. Family members are not involved in running the business, and companies vary greatly in size from revenue of a few million to in excess of one billion.
Non-executive directors are in the majority on New Zealand boards, controlling the company on behalf of shareholders. Often the non-executive directors approve strategy after hearing input from management.
In comparison, typically in Hong Kong the founder is still involved in an organisation and has a significant shareholding even if the company is publicly listed. Family members are often still running the company. Hong Kong businesses are often large -- frequently posting annual revenues in excess of US$1 billion.
In Hong Kong, non-executive directors provide an independent voice on the board but the founder maintains considerable influence. And strategy is largely controlled by a profoundly talented founder.
Corporate governance in Hong Kong is largely based on the UK system and has changed little since the handover of the country from the UK back to China in 1997.
Much of my recent work in Hong Kong has involved assisting family firms to understand and plot out a path towards a more mature model of corporate governance. Some of these firms have been privately held. Others were publicly listed with the founder retaining considerable influence. In a recent project I used a chart (see "Step by step: governance by stages") to illustrate the common stages that firms follow as they develop their governance.
Critically, I have found in conducting board and director evaluations in Hong Kong that companies want to better understand a best-practice governance model and plot a path towards it. …