Globalization and digitalization have made the business environment more dynamic than ever, which complicates corporate governance processes and adds new layers of regulatory complexity. To ensure the corporate governance framework remains fit for purpose and continues to promote improvement in the quality of governance, the Stock Exchange of Hong Kong (HKEx) conducted a consultation on the Corporate Governance Code and related Rules in April 2021, and published the conclusion and amended the Code and Rules in December 2021 which took effect on 1 January 2022, setting out:
(1) the mandatory requirements for disclosure in an issuer’s Corporate Governance Report; and
(2) the principles of good corporate governance, the code provisions on a “comply or explain” basis and certain recommended best practices.
To summarize, listed company boards are now required to align the issuer’s culture with its purpose, values and strategy, and all directors are required to act with integrity, lead by example and promote the desired culture. Listed issuers are also required to establish whistleblowing policy(ies) and system(s) that promote and support anti-corruption laws and regulations, as well as mechanism(s) to ensure independent views and input are available to the board and disclose them in their Corporate Governance Reports. Listed company boards should conduct an annual review of the implementation and effectiveness of these mechanisms. And by 1 January 2023, a new independent non-executive directors (INED) should be appointed at the issuer’s next annual general meeting if all current INEDs have served nine years.
It is foreseeable that new rules on corporate governance will be pushed out from time to time, and it will take more and more effort to report regulatory filing and ensure compliance.
On the other hand, good corporate governance is made up of best practices to increase transparency between the company and all its stakeholders. It is the evolution of leadership, board and operational practices to drive sustainable performance and inspire stakeholder confidence. Transparency and sharing of information are therefore key themes of modern governance.
While the digital era brings disruption and complexity to the business sphere, it also revolutionizes the ways we manage corporate governance. Digitalization empowers people to work more efficiently with relevant data and shared information, enabling more transparency and faster operational processes. Administrative tasks that would take days or weeks to complete can now be finished in minutes. Evidence and logs help clarify agreements, reduce risks and fasten response times.
Tricor Red, for example, is a state-of-the-art, easy-to-navigate, commercial-grade online portal which helps companies to initiate, update, and track all corporate governance and compliance processes on one single platform. It empowers companies to manage critical and time-consuming details with efficiency, agility and flexibility. With dashboards that consolidate company and directors’ information, statutory documents, upcoming statutory duties and timelines, it serves as a secure digital “front door” to access the most critical information, and thereby facilitating issuers to fulfill compliance duties timely and accurately with significantly less effort.
New technologies and digitization are also allowing us to communicate quickly, with information being shared faster, more transparently and ultimately in a safer manner, enabling faster decision making and taking advantage of new opportunities. E-meeting tools like SPOT facilitate the holding of large scale virtual and hybrid annual general meetings, with live streaming, online voting and proxy functions; board portals like Boardfolio manage the full lifecycle of board and committee meetings efficiently and effectively; the Issuer Portal also provides easy access to shareholder reports, competitor analysis and more.
Corporate governance has been a successful concept throughout the decades. It matters because well-run companies are more likely to attract greater investment opportunities, which enables them to innovate and expand, and to generate wealth and jobs for the economies in which they are based. While corporate governance practitioners are faced with both challenges and opportunities in the digital era, it is certain that good governance remains sustainable during a time of technological and managerial disruption. Under the pressure of new economic, social, and ecologic challenges, it is more crucial than ever for a company’s board of directors to transform corporate governance digitally so as to maintain competitiveness and fulfill regulatory duties.