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Male directors on Hong Kong boards: ACGA calls for a cap of 70%

by Jane Moir, ACGA

30 June 2021

Affirmative action is needed to narrow the diversity abyss 

ACGA is calling for a 30% quota of women on boards within four years as a proactive step to curb male domination at Hong Kong’s listed companies.

We believe bold moves are necessary and have outlined our proposal in a submission to HKEX as part of its consultation on the CG Code (see our full submission here). While we agree with HKEX that single gender boards are no longer acceptable, it is obvious that progress on diversity has eluded Hong Kong. More drastic action is required.

Hong Kong lags London and New York by a mile

As a major financial centre, Hong Kong is a conspicuous straggler in terms of board diversity. According to MSCI figures, 12.7% of director seats in Hong Kong are held by women (the figure is 13.7% for Hang Seng Index companies, according to the Women’s Foundation), compared to 28.2% in the United States and 34.3% in the United Kingdom.

Hong Kong ranks with Qatar, Saudi Arabia and the United Arab Emirates as one of the top ten markets with no women on boards, according to MSCI’s “Women on Boards 2020 Progress Report,” published in November 2020. In fact, Hong Kong is regressing on this front: it saw the number of all-male boards rise from 32% in 2019 to 37% last year. 

Within the region, in Singapore the figure of male-only boards is only 5%. In Australia, just 2% of companies have all-male boards, while in Thailand the figure is 7% and 14% in the Philippines. 

Given the slow pace of change in Hong Kong, ACGA believes a quota and solid timeframe is in order. We set this at 30% within four years and note in our submission to HKEX that a phased approach—starting with the top 100 to 200 listed firms—could be adopted.

Bold, not baby steps

Board diversity is just one area where ACGA feels the HKEX consultation, “Review of Corporate Governance Code and Related Listing Rules” could go further. ACGA favours the concept of a lead independent director: sadly, this only gets a brief mention and Hong Kong is destined to remain behind the curve in the region by failing to make this a code provision.

The issue of low independent votes for directors is not covered in the consultation. In situations where directors are voted in—despite a majority of independent shareholders voting against them—we would like to see companies make a statement as to why these directors should remain on the board.

ACGA further encourages the introduction of a specific yardstick to monitor issuers’ engagement with shareholders: in particular, by adopting a provision similar to the one found in the UK Code of Corporate Governance which requires companies to explain what action it plans to take in the event that 20% or more votes are cast against board recommendations for a resolution.

Missed opportunities but a few gains

Generally, ACGA feels the consultation lacks ambition and should be taking bolder steps to upgrade governance at Hong Kong-listed companies. However, there are a few areas where we see progress:

Introducing a new code provision on anti-corruption and whistleblowing policies. We hope this proposed change elevates the importance of corruption and whistleblowing in the eyes of company directors and executives. ACGA believes enforcement on corruption in the region has hit a plateau and Hong Kong scored poorly on this front for its lack of extra-territorial powers.

Board refreshment and succession planning. We support HKEX’s proposal to introduce in the Code a separate vote for independent shareholders on any independent director who has served for more than nine years. Again, here Hong Kong is already behind other markets in the region such as Malaysia and Singapore, who require separate votes on long-serving INEDs. ACGA would like to see HKEX go even further and require a separate vote for independent shareholders from the beginning of an INED’s tenure. 

Equity-based remuneration to INEDs. We strongly support the view that INEDs should not be given equity-based compensation and are surprised HKEX is only proposing to make this a recommended best practice. ACGA believes it should be a code provision if not a listing rule.

Nomination committees. We strongly support upgrading nomination committees from a code provision to a listing rule, requiring the chair to be an INED and a majority of members to be INEDs. Among other things this removes a long-standing loophole where a board chairman, who is normally a connected person, can chair the nomination committee.


About the Author(s)


Jane Moir
Research Director, Hong Kong, ACGA

Jane Moir
 joined ACGA as a Research Director focussed on Hong Kong. Prior to joining ACGA, she worked as a barrister and financial journalist, including 11 years at the South China Morning Post covering legal and regulatory issues. Jane has also worked as a part-time lecturer in law at HKU Space and was a contributing writer for Lexis-Nexis on securities law, corporate crime and money laundering.

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