Hong Kong and Singapore’s corporate governance lead in region narrowed by dual-class shareholding IPOs, say experts
- Hong Kong and Singapore maintain high ranks in report by brokerage CLSA and non-profit organisation Asia Corporate Governance Association
- Principle of fairness ‘under fire’ because of introduction of dual-class shareholding structures
Hong Kong and Singapore maintained their high ranks in a report on corporate governance published on Wednesday, but a decision to allow listings by dual-class shareholding companies has eroded their edge over other jurisdictions in the region.
The report was presented by brokerage CLSA and non-profit organisation Asian Corporate Governance Association. The association ranked Hong Kong second in the region, with a score of 60 in its biennial survey, followed by 59 for Singapore in third position. CLSA, on the other hand, ranked Singapore second with 70.1 points, Japan third with 66.7 points and Hong Kong fourth with 66.3 points. Australia topped the rankings in both cases.
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In 2016, the non-profit ranked Singapore second and Hong Kong third, while CLSA ranked the Lion City third and the special administrative region fourth, behind Japan and Australia in second and first places, respectively.
“The introduction of dual-class shares in Hong Kong and Singapore highlights a threat to that fundamental driver [of better corporate governance],” the association and CLSA said in their joint report. While a belief “in the value of transparency and accountability remains largely intact, the third principle, fairness, has come under fire”, they said.
Shareholders with dual-class shares have different voting rights. Through this structure – popular among emerging companies and industries – founding shareholders or key management with minority ownership can still retain control over company board directors and major decision-making.
Hong Kong has allowed companies with dual-class shares to list since April this year; Singapore followed in June, in the face of competition from exchanges in the United States that have long allowed such listings.
Only two mainland China companies with dual-class shareholding structures have listed in Hong Kong so far: Xiaomi, the world’s fourth-largest smartphone supplier; and food delivery service platform Meituan Dianping.
