Sponsored by Doing Business in the Asia Pacific-Examining the Governance Implications April Chan

1. 2011Annual Conference Sponsored by Doing Business in the Asia Pacific-Examining the Governance Implications April Chan

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3. “Doing Business in the Asia-Pacific – examining the governance implications” – A practitioner’s perspective April Chan President, The Hong Kong Institute of Chartered Secretaries President, Corporate Secretaries International Association Company Secretary, CLP Holdings Limited

4. This presentation covers: • Business Environment in Asia-Pacific Region (focus on China and India) • Challenges to Corporate Governance in China and India • Tackling the Challenges: a Company Secretary’s perspective • Case Study: CLP Group 1

5. Business Environment in Asia-Pacific Region • Asia-Pacific Region remains a diverse region, with a range of culture, economic, legal, and political systems. Table: GDP, Market Capitalisation, Listed Companies and Legal System in Asia-Pacific Region 2

6. Business Environment in China and India • Concentrated shareholdings • Block holding by families in business house and by individuals in entrepreneurial ventures • Dominant and significant state-owned sector • Growing capital markets • Businesses transitioning rapidly to listed status 3

7. Concentrated Shareholding –Implications and Challenges on Governance • Dominant shareholder, potential for: • Conflict of interests • Related party transactions • Excessive influence on board • Weakened separation of board and management • Unfair treatment of minority shareholders • Significant SOE sector, leading to: • Insulation from market forces and disciplines • Status above applicable laws and regulations 4

8. Growing Capital Markets –Implications and Challenges on Governance • Short operational track record • Lack of long-term vision • No tradition of accountability to stakeholders • No tradition of commitment to transparency and honesty • Shortcomings in legal and regulatory systems and government commitment to demanding and enforcing good governance 5

9. Business transitioning rapidly to listed status – China; a Case Study • Moody’s Red Flags Report on China • Screened 61 rated Chinese entities to identify areas of governance concern Number of Red Flags Tripped Source: Red Flags for Emerging-Market Companies: A Focus on China issued by Moody’s Investors Services 6

10. Tackling the Challenges: a Company Secretary’s perspective • Improve Board Performance • Participate in establishment of proper and transparent nomination process • Issue guidelines on independence, directors’ duties, etc. • Update directors on regulatory changes timely • Provide continuous development training for directors • Introduce effective board performance evaluation 7

11. Tackling the Challenges: a Company Secretary’s perspective (Cont’) • Promote Good Corporate Governance • Establish Corporate Governance Framework for adoption by Company • Recommend good corporate governance practice to the Board which are applicable to the Company as a whole • Participate proactively in establishment of Code of Conduct • Contribute to the corporate governance debate/government and regulatory consultations 8

12. Tackling the Challenges: a Company Secretary’s perspective (Cont’) • Promote Transparency of Disclosure and Dialogue with Shareholders • Establish Shareholders’ Communication Policy • Fair and continuous disclosure – in policy and practices • Publish Annual Report/Interim Report/Quarterly Statements and timely announcements • Hold shareholders’ visit programme to enhance shareholders’ activism • Annual General Meeting • Website • Shareholders’ hotline 9

13. Case Study: CLP Group • Incorporated in Hong Kong • Listed before World War II • Supply electricity to Hong Kong since 1903; Mainland expansion in 1980s; regional growth from 1990s to Australia, Southeast Asia, Taiwan and 2000s to India • 34.87% owned by Kadoorie Family • No other substantial shareholder • Business centred in Hong Kong • Board and Management located in Hong Kong • Subject to public scrutiny in Hong Kong, due to nature of business • Growing scrutiny of environmental performance • Global Dow 150 Company • Dow Jones Sustainability Asia Pacific 40 Index Company • Hang Seng Index Constituent • Hang Seng Corporate Sustainability Index Constituent • Hang Seng (Mainland and Hong Kong) Corporate Sustainability Index Constituent • Well recognised as among the best in corporate governance in Asia 10

14. CLP Corporate Governance Framework Source: https://www.clpgroup.com/ourcompany/corporategovernance/framework/codespoliciesandguidelines/Documents/CLP%20CG%20Eng%20(Clean)%202009.pdf 11

15. CLP experience – Jhajjar Project, India • In 2008 CLP successfully bid for the greenfield development of a 1320MW coal-fired power station at Jhajjar in Haryana State. • The basis of tendering was against the lowest tariff bid. • Station due for commissioning in 2012. 12

16. Governance Challenges • Bidding • Different laws, regulations and bidding procedures • Governance characteristics and processes of key stakeholders – Coal India, India Railways, Haryana State Government, Domestics banks etc. • Environmental governance – compliance or better • Development and Construction • Governance for safety • Governance for quality • Ongoing stakeholder interfaces • Evolving regulatory issues (e.g. visas for Chinese workers) 13

17. Conclusion • Corporate governance in Asia-Pacific is facing a number of challenges. • Raising the bar on corporate governance demands the support of all internal stakeholders (shareholders, board of directors and management) and external stakeholders (regulatory and professional bodies). • But we are the Corporate Governance Professionals – we can make a difference by: • Improving Board Performance • Promoting Good Corporate Governance • Promoting Transparency of Disclosure and Dialogue with Shareholders 14

18. Thank You