Hong Kong Exchanges and Clearing Limited (HKEx) published a consultation paper on proposed changes to the Corporate Governance Code and Corporate Governance Report (Code) concerning board diversity. The change involves a ‘comply or explain’ provision for all companies listed on its Exchange to have a policy on board diversity, and to report on this policy in their corporate governance and interim reports.
Under the proposals, the Code’s Principle for “Board Composition” will be revised to include “diversity of perspectives”. This is so that when the issuer reviews its board composition, in addition to examining whether it has a balance of skills, experience and independence, it should also consider the benefits of diversity.
The proposals include a new Code Provision (i.e. subject to “comply or explain”) stating that the nomination committee (or the board) should have a policy concerning diversity in the boardroom, and should disclose the policy or a summary of the policy in the corporate governance report. There will be a new Note to clarify what is meant by diversity.
It is also proposed that if the issuer has a policy concerning diversity, it should disclose any measurable objectives that it has set for implementing the policy, and progress on achieving the objectives.
“Board diversity has become an increasingly important issue globally and the debate in favour of diversity tends to focus on fairness, equality and corporate performance amongst other things. However, our principal objective of the proposed amendments is to enhance the effectiveness of the board and corporate governance. This consultation paper is part of our ongoing initiative to promote the development of higher corporate governance standards by encouraging transparency about the board and its processes,” said Mark Dickens, HKEx’s Head of Listing.
The Consultation Paper can be downloaded from the HKEx website. Interested parties are encouraged to respond to the Consultation Paper by submitting a questionnaire by 9 November 2012.