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To raise understanding and awareness about the importance of corporate governance, and to help publicly funded organisations assess their current performance and decide whether/what changes need to be made, a guide to corporate governance for subvented organisations will shortly be published, a Government spokesman said today (May 20).
"The Government is committed to improving standards of corporate governance in subvented organisations," the spokesman said, noting that the Director of Audit had revealed various inadequacies in corporate governance of subvented organisations in recent years.
By setting out the principles and best practices relating to corporate governance, advising on matters that have raised concern, and providing checklists, the Guide to Corporate Governance for Subvented Organisations will help subvented organisations to conduct "health checks" on aspects of corporate governance for their respective organisations.
With the goal of helping to sustain public trust in bodies which receive public funds, the guide aims primarily at organisations which receive recurrent subventions from the Government to cover part or all of their operational expenses.
At the same time, organisations which receive capital grants, non-cash concessions or one-off payments, and companies in which the Government holds shares are also encouraged to refer to the best practices promulgated in the guide.
For reference by subvented organisations, the guide introduces the principles, advice on and best practices of corporate governance and covers the following topics:
- Board structure and composition
- Board operation and effectiveness
- Strategy, planning and monitoring
- Transparency and disclosure
- Corporate citizenship
- Risk management and compliance
- Legal issues
Following are the key points of the guide:
* Corporate governance refers to the processes by which organisations are directed, controlled and held to account. It encompasses authority, accountability, stewardship, leadership, direction and control exercised in the organisation.
* The Government considers it essential that subvented organisations attain, and maintain, high standards of corporate governance.
* Many subvented organisations receive substantial recurrent funding from the public purse, and so must be accountable to both the Government and the community.
* The board of each subvented organisation is responsible for its activities and performance.
* The board and individual board members of subvented organisations have important responsibilities for corporate governance. They need to discharge their responsibilities with a serious, professional, committed and honest approach.
* There is no "one-size-fits-all" corporate governance model.
* Subvented organisations should establish effective and appropriate arrangements for their board of directors, to ensure that it has the necessary skills and experience available to it, that board meetings are conducted in a professional manner, and that board decisions are implemented in a timely and effective way.
* Boards need to consider the various arrangements necessary and appropriate to the subvented organisation's circumstances, then implement, monitor and review these arrangements. Of particular importance are:
- compliance with relevant legislation and common law requirements;
- compliance with Memorandum of Administrative Arrangements or other funding agreements with the Government;
- compliance with the organisation's memorandum and articles of association, if one exists;
- sound budgetary and financial management;
- internal and external auditing arrangements;
- effective performance monitoring;
- appropriate levels of transparency within the organisation, and between the organisation and its stakeholders;
- proper management of conflicts of interest and establishment of codes of conduct; and
- maintenance of effective communication between the board and its stakeholders including its staff.
* Subvented organisations need to establish a clear working relationship between the chairperson and the chief executive officer, and between the board and the senior management. There should be a clear understanding of the relevant roles, responsibilities, delegations of authority, checks and balances and so on.
* The Government is responsible and accountable for the proper use of public funds, and is duty bound to monitor the activities and performance of publicly funded bodies to ensure that public monies are properly used for their intended purposes. Subvented organisations are obliged to cooperate with the Government's monitoring.
* Subvented organisations should aim to introduce the best practices outlined in the guide. Where this is not appropriate, the organisation should be prepared to explain why not – the "comply or explain" principle.
To enable the board members and senior executives of subvented organisations to have a better understanding of different aspects of corporate governance as well as the guide, four half-day seminars will be organised by the Efficiency Unit (EU) on May 24 and May 31. The Chief Secretary for Administration, Mr Henry Tang, and the Financial Secretary, Mr John C Tsang, will address the opening of the first and fourth seminar on May 24 and May 31 respectively. Other speakers include the Director of Audit, Mr Benjamin Tang, contributors to the guide, subject experts on corporate governance, and subvented organisation representatives who have experienced corporate governance reform processes.
The guide will be available from the EU's website (www.eu.gov.hk/english/publication/pub_bp/pub_bp.html) from May 24, 2010, while hard copies will be sent to all subvented organisations for their reference.
Ends/Thursday, May 20, 2010
Issued at HKT 11:11
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