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Sponsored by Doing Business in the Asia Pacific-Examining the Governance Implications April Chan 2011 ANNUAL CONFERENCE

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Doing Business in the Asia-Pacific examining the governance implications A practitioners perspective April Chan President, The Hong Kong Institute of Chartered Secretaries President, Corporate Secretaries International Association Company Secretary, CLP Holdings Limited

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1 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 Secretarys perspective Case Study: CLP Group

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2 Asia-Pacific Region remains a diverse region, with a range of culture, economic, legal, and political systems. Business Environment in Asia-Pacific Region Table: GDP, Market Capitalisation, Listed Companies and Legal System in Asia-Pacific Region Jurisdiction GDP (2010) (USD Billions, PPP) Market Capitalisation (USD Millions) Number of Listed CompaniesLegal System China10,085.714,027,8402,063 Civil Law Traditions India4,060.393,228,4556,586 Common Law Traditions Korea, Republic1,459.251,091,9111,798 Civil Law Traditions Australia882.361,400,0001,999 Common Law Traditions Thailand586.88277,731541 Civil Law Traditions Malaysia414.43408,689956 Common Law Traditions Singapore291.94647,226778 Common Law Traditions Vietnam276.5730,325290 Civil Law Traditions Hong Kong SAR, China2252,711,3161,413 Common Law Traditions

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3 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

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4 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

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5 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

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

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7 Tackling the Challenges: a Company Secretarys 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

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8 Tackling the Challenges: a Company Secretarys 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

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9 Tackling the Challenges: a Company Secretarys 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

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1010 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

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

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12 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.

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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) 1313

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14 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

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Thank You