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Speech by SFST at the Best Corporate Governance Disclosure Awards 2006 (English only)

    Following is a speech by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, at the Best Corporate Governance Disclosure Awards 2006 today (November 28) (English only):

Mr (Paul) Chan, Mr Chew (Fook Aun), Mr (Jim) Wardell, distinguished guests, ladies and gentlemen,

     First, thank you Paul for inviting me to present the Best Corporate Governance Disclosure Awards this year. I had the pleasure to be here last year, and am delighted to be here again to pay tribute to all of you in the HKICPA, and the companies or organisations you serve, for being the Government's partners in ensuring that best corporate governance practices take root in your respective business settings.  

     Good corporate governance is the key to maintaining Hong Kong's position as an international financial centre. An essential ingredient of good corporate governance is accurate, timely and comprehensive corporate disclosure. This not only helps to cultivate the confidence of shareholders and investors in a company, but also contributes to the building up of the company's good public image and reputation. All of these have a positive bearing on the share price and business of the company.

     Corporate disclosure encompasses all types of information provided by the company about its past, present and future, no matter whether it is disseminated in the form of periodic reports, including annual and interim reports, announcements or statements made in public by major shareholders or management of the company. Shareholders, investors and members of the public take all these into account in forming their views about the corporate governance, solvency and future prospect of the company. The key is accuracy, timeliness and comprehensiveness.

     No doubts our awardees today must have performed very well on all these three aspects of corporate disclosure before they can be selected for the Best Corporate Governance Disclosure awards. My heartfelt congratulations to the deserving awardees on the key roles they have played in contributing to good corporate disclosure of companies in Hong Kong, through producing accurate, informative and well-presented annual reports.

     The best corporate governance disclosure is not blindly adhering to some rigid formula or letter of laws. Statutes or listing-rules requiring disclosures in a true and objective manner are the necessary minimum, but at your level, we expect much more from you.

     Apart from financial information, we are delighted to see more detailed voluntary disclosures about how your company or organization is managed, and how its management sees its past performance and the future. We also welcome elaborations on companies' corporate social responsibility such as  growing awareness for protecting the environment, promoting occupational safety and equal opportunities, and participating in public services.  

     All these commendable efforts will pay off when you earn public trust and respect for your commitment to corporate transparency and social responsibility, which form the important ingredients of your organisational identity. For companies that go public, the recognition may be reflected in the stock price, demonstrating clear market signals of favour and endorsement.

     While we recognise the accomplishments of the awardees today, we must not forget we should pay equal attention to the risks that the other end of the spectrum may bring to our markets. We have to guard against letting standards slip, particularly when we are keenly aware that market sentiment can easily be affected by a single case of poor corporate disclosure.

     The provision of false or misleading information on a listed company seriously affects the confidence of shareholders and investors as well as the public image of the company. I would like to remind shareholders and directors of publicly listed companies that to do so is also subject to criminal consequences under the SFO or sanctions under the Listing Rules of the Stock Exchange of Hong Kong, which govern disclosures in initial public offerings and continuing obligations of listed companies including ongoing disclosure of price-sensitive information.

     Among you all present today, many are experienced auditors who have the ability to decode poorly presented, incomplete or even deliberately misleading disclosures in financial reports.  By paying close attention to disclosure materials, potential and unpublicised problems can be identified and perhaps fixed before a company collapses. The investing public relies on you to do your part in sounding the alarm dutifully and as early as possible to expose deceptive practices.

     With support from the accounting profession, market players and the investing public, we are working on the establishment of a Financial Reporting Council (FRC) to further enhance the quality of financial reporting by listed companies.

     The Government will soon announce the appointments of the inaugural Chairman and board members of the FRC, which, according to our timeline, will be in full operation early next year.  The new statutory investigator will be empowered to review and enquire into compliance issues regarding financial reports of companies listed in Hong Kong.  

     On the other hand, we need your continuous support to set a good example for fellow companies in Hong Kong, so that the overall quality of disclosures will be enhanced across-the-board. I would much rather like to see the panel of judges of this competition receiving too many quality submissions in the future years than the FRC being overloaded.

     Ladies and gentlemen, I commend the HKICPA and its panel of judges for their efforts in promoting high standards of corporate governance disclosure, through recognizing companies and organisations that always strive for excellence.

     To all the award winners, I extend to you my congratulations again. You have added another element to our recipe for Hong Kong's success as an international business and financial centre.  I firmly believe that you can and will do even better in the years ahead.

     Thank you.

Ends/Tuesday, November 28, 2006
Issued at HKT 14:44