Polls are a part of the future of Hong Kong, at least for listed companies, if not the Government. This year, a number of index members have announced that they will conduct a poll, possibly making a virtue out of the fact that Webb-site.com could force them to anyway. It's the beginning of the end for the rigged show-of-hands system. We call on the Stock Exchange and its Listing Committee to make poll voting mandatory, as the OECD Asian round table recommended.

Project Poll Update
5 April 2004

Just over a year ago, Webb-site.com launched project poll, in which we purchased 10 shares of each contemporary member of the Hang Seng Index, broke them into 5 registered holdings and sent a representative (either your editor or a volunteer) to exercise our legal rights to require that the votes be counted at each shareholders' meeting on a poll (1-share-1-vote) rather than the show of hands system (one-person-one-vote) in which proxy votes are ignored.

In each meeting where we did this, the votes were properly counted. The only meeting we missed was the AGM of HSBC in London, but our volunteer will do better this year.

We are pleased to see that a number of companies have now taken this on board. We told them that if they stated in their notice of AGM and their proxy form that the Chairman of the meeting would exercise his right to require a poll on all resolutions, then we would not have to attend their meetings for this purpose.

The year is still young, but  so far 11 members of the index have published their notice of AGM, and 5 of them, as well as HKEx (which is not in the index) have stated that they will conduct a poll. So brownie points to Bank of East Asia (0023), Cathay Pacific Airways (0293), Cheung Kong Infrastructure (1038), CLP Holdings (0002) and Hongkong Electric (0006), while black marks go to CITIC Pacific (0267), China Mobile (0941), China Unicom (0762), Hang Seng Bank (0011), HSBC (0005) and TVB (0511). We'll have someone at your meetings to secure a poll. Let's hope that the rest of the index gets the message.

However, before getting too excited about this apparent enthusiasm for counting investor votes, we should note that a number of these companies control (or are under common control with) other listed companies which are not in the Hang Seng Index, which are not (yet) part of Project Poll. Regrettably, for example, Hong Kong Aircraft Engineering (0044), which is majority controlled by Swire Pacific and Cathay Pacific Airways, has not adopted this policy and will conduct its votes on a show of hands. We would be more convinced that index-member companies are not making a virtue out of necessity if they would extend this poll voting policy to all companies under common control. If they don't, then we may have to extend Project Poll to the non-index members of these groups next year.

Listing Rules and Code on Corporate Governance

The good news is that in the new Listing Rules which became effective on 31-Mar-04, there is now a requirement that if a poll is held (a big if) then the results must be published. So at least we won't have the problem we occasionally encountered last year of companies conducting a poll but resisting disclosure of the results.

The bad news is that there has been no progress on making poll voting mandatory in the Listing Rules. HKEx has also published an exposure draft of the non-binding Code on Corporate Governance Practices, a two-tier document which inches towards reform in several areas, proposing some things as comply-or-explain "code provisions", and others as weaker comply-or-don't-explain "recommended best practices". For example, quarterly reporting falls into the latter category. We see little point in this category since voluntary options were always there - it just puts wishful thinking into writing, to be ignored by most companies.

However, when it comes to shareholder meetings, the draft code does not even include poll voting as a "recommended best Practice", let alone putting it in the stricter "comply or explain" code provisions. The only proposal it makes is that the issuer should tell shareholders how to demand a poll, but since you have to be at the meeting to demand a poll, this is of no use to shareholders who are unable to attend meetings, particularly when they live thousands of kilometres away, but would like their proxy votes to be counted. We call on the Stock Exchange and its Listing Committee to face up to the public interest and make poll voting mandatory.

The OECD White Paper on Corporate Governance in Asia, published on 10-Jun-03, came out of an "Asian Round Table" in which both HKEx and the SFC participated. On voting practices, paragraph 86-87 stated:

"There are a number of practices across Asia that prevent or impede effective shareholder participation in shareholder meetings. These practices  include:.. (vii) prohibitions on voting in absentia;...(ix) vote by...show of hands; (x) failure to record the conducting and outcome of meetings in  ways that are verifiable."

"Where the above practices can be corrected through simple changes in laws, regulations or listing requirements, Asian policy-makers and regulators should effect these changes without delay." (emphasis added)

So why the delay?

© Webb-site.com, 2004

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