Review Of The Independent Director System And The Related Issues In Hong Kong

Hong Kong becomes the leader of corporate governance in Asia Pacific region after the continuous effort in improving the rules and regulations in corporate governance and the relevant market reforms in the past ten years. There are still a lot of loopholes and rooms to be improved, in particular, the existing corporate governance measures may not be effective in monitoring the family controlled companies. Family business in Hong Kong changed the nature of the core problem to be addressed by corporate governance from agency problem to how to prevent the controlling shareholder from jeopardize the right of minority shareholders. Reform of the Independent Non-Executive Director (INED) system is the key to the problem, it is critical to enhance the independence and professionalism of the INED. Suggested measures include the controlling shareholder shall abstain from voting in the election and appointment of the INED since the purpose of INED is to monitor the controlling shareholder; the salary of INED shall be in line with their work load and the risk; the duties and the relevant rights to discharge the duties shall be backed by law; and to promote the professionalism of INED via continuous education and encourage more professionals to work as full time INED and eventually establish a INED market.This paper reviewed the academic literature regarding the concept and theories of corporate governance; analyzed the existing legal and regulatory framework of corporate governance in Hong Kong and introduced the global development trend. The effectiveness and proble\ms of the corporate governance measures in Hong Kong was revealed from the recent corporate governance research reports presented in the paper. INED system is critical to the effectiveness of the corporate governance, major suggestions in improving the INED system in Hong Kong include the controlling shareholder should be abstained from voting in the election of INED; the salary of INED should tied with their workload and the risk involved; the duties and the relevant rights of INED should be backed by legislations and should encourage the professionalism of INED.