Government board appointments to HKEx prefigure voting rights issue

HKEx has named two new board members, who will represent the Hong Kong government, Anita Fung, ex-group general manager of HSBC and Citic’s Rafael Gil-Tienda.

Hong Kong Exchanges and Clearing Limited (HKEx) has named two new board members who will represent the Hong Kong government.

The new appointees are Anita Fung, ex-group general manager of HSBC and Citic’s Rafael Gil-Tienda They replace Stephen Hui and Michael Lee, who retire from the Board. John Harrison and Margaret Leung have been re-appointed.

HKEx’s board consists of 13 directors, six elected by shareholders, six appointed by the Government, and the chief executive, Charlies Li of HKEx, who is an ex-officio member. The Government-appointed directors are appointed by the financial Secretary, pursuant to Section 77 of the Securities and Futures Ordinance.

Whilst not directly linked, the appointments evoke a comment made on the blog of Charles Li about weighted voting rights. The exchange began a consultation on weighted voting rights in August of 2014.

We still await the results.

He mentioned that the Government, a minority shareholder in HKEx, had the rights to appoint a disproportionate number of directors – and he was duty bound to accept that.  This, he felt, had parallels to the conceptual issues being discussed in the question of voting rights.

HKEx continues to hold the moral high ground on the issue, because weighted voting rights are still not allowed in Hong Kong. However, such a stance risks ruling Hong Kong out from potentially lucrative listings, such as that of AliBaba in 2014.

Publicly, HKEx is being scrupulously impartial on whether changes or dilutions should be implemented. In private, and off the record, executives give an impression that they would welcome the chance to make changes and broaden their ability to capture business from Chinese listings in situations where entrepreneurs want to preserve close control.