Hong Kong has long been known as a challenging market where an interconnected web of family controlled companies earn headlines alternately for impressive financial performance and eyebrow raising scandals.
The most recent controversy involves Macao billionaire Stanley Ho, the octogenarian family patriarch, who together with the 17 children he fathered with various women, owns a controlling stake in a major Macao casino company, listed in Hong Kong. Macao has made a name for itself as one of the world’s gambling capitals thanks in part to its special access to clients from mainland China. Now, however, many investors are starting to view Mr. Ho and his company, SJM Holdings as a risky bet. Meanwhile, other commentators are starting to raise questions about the under-representation of women at the topic levels of Hong Kong’s corporations.
ageing Patriarchs Retain Power
According to statements made by his lawyer, Mr. Ho, who is 89 years old and is currently recuperating from brain surgery, was “very disappointed and distressed” about a transaction that effectively ceded most of his stake in the casino operations to members of his family.
“This is robbery,” Mr. Ho reportedly said.
However, what makes the story more complicated is that a few hours after the media caught wind of the scandal, Mr. Ho penned a letter to relatives- a letter which was distributed to the news media by a public relations firm acting on behalf of the family, in which he refuted his earlier complaints about his loss of the company’s control. Mr. Ho wrote that he had, after all, intended to make the transaction, and that he had done so voluntarily and after careful consideration.
In the weeks that followed, however, Mr. Ho released a series of contradictory video-taped statements.
SJM Holdings, which operates more than a dozen casinos set up by Mr. Ho over a number of years and is listed on the Hong Kong stock exchange, still has a market value of almost US$10 billion, but its share price is slipping. On January 24, 2011, as soon as news of the share restructuring was made public, SJM’s shares fell by as much as 9%.
Even though analysts predict a bright future for casino investment in Macao, clearly there are still concerns about governance issues at the major firms in the sector. However the fight for control of SJM Holdings is resolved, the fact remains that similar governance concerns at other Hong Kong listed companies will continue to play a part in the risk / reward decisions investors make. After all, patriarchs in Hong Kong frequently work far longer than most executives in the U.S. and Europe, and many of Hong Kong’s most prominent tycoons are in their 70s and 80s. Mr. Ho, at 88, is the second oldest chairman at the 71 large cap companies that are listed in Hong Kong (the oldest Chairman is 102).
A recent article in The Economist on Hong Kong succinctly states “companies can survive for hundreds of years. Their founders cannot.” Investors can only hope that Hong Kong’s companies have succession plans in place.
Where are the Female Directors?
In a recent blog post, corporate governance expert Nell Minow complained that corporate boards all over the world tend to be “male” and “stale.” Hong Kong is certainly no exception. According to the Women on Boards 2011 report, which was published this week by GovernanceMetrics International, 90% of the large cap companies listed in Hong Kong have fewer than three female directors serving on their boards.
Overall, four out of every 10 of the company’s major companies have ZERO women on their boards. In total, women hold only 10% of the board seats at Hong Kong’s biggest companies.
In a recent article called “Women Still Face Barriers in Hong Kong” New York Times correspondent Bettina Wassener explained that in Hong Kong, women are placed “squarely in the role of homemaker and mother — even when they are also breadwinners.”
“It’s a man’s world — the top echelons of politics and business here are all dominated by men,” explained Emily Lau, the first directly elected female member of Hong-Kong’s Legislative Council.
Some commentators believe that the trouble women have had in gaining entry to Hong Kong’s corporate board rooms is due to the fact that the country’s attitudes remain traditional.
Su-Mei Thompson, the CEO of the Women’s Foundation, a Hong Kong-based non-profit, asked “When will society finally realise that it is vital for women to play a more active part in high-level decision making?”
A Role for Regulators?
Hong Kong’s stock market regulator, the Securities and Futures Commission (SFC) has thus far demurred from intervening in the Ho family’s dispute for control of SJM. Most commentators agree that it is equally unlikely that Hong Kong’s government will follow the example set by countries like Norway and Spain and step in and impose quotas for female board members at publicly listed companies.
Hong Kong has historically been the world’s primary melting pot of Eastern and Western values. However, when it comes to ageing patriarchs and the exclusion of women from corporate boards, the country’s traditional values are getting more attention than ever from foreign investors.
Moving forward, companies in Hong Kong, like their peers elsewhere around the globe, will have to start taking these issues into consideration.
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