HK Exchange encourages greater self-scrutiny

A crisis of confidence in overseas-listed Chinese companies has the operator of the Hong Kong Stock Exchange encouraging vetting and better corporate governance for the companies listed on its bourse, the Wall Street Journal reported. Fraud allegations, especially in the US, have reduced investor confidence in Hong Kong-listed companies despite the city’s tougher listing standards, said Mark Dickens, the head of listing for Hong Kong Exchanges & Clearing (HKEX; 0388.HKG). “If you’re a fund manager, there comes a point when it’s easier to get rid of the stock than to think about it,” said Dickens. HKEX has begun recommending that some questionable companies sponsor investigations of themselves; it also hopes to soon publish conclusions from a market consultation that will require one-third of board members to be independent non-executive directors and issuers to set up a remuneration committee including the chairman, pending approval from Hong Kong’s Securities and Futures Commission. Critics say the measures don’t go far enough: David Webb, a shareholder activist and former independent non-executive director of HK Exchanges, has compared the proposals to “rearranging deck chairs on the Titanic.”