HONG KONG: The city's regulators should tighten current regulations and bolster corporate governance standards to scale down misconduct in the ranks of public and private corporations, analysts said.

Corporate governance standards and practices here are not at par with those in other jurisdictions, and this is an area of concern, said Simon Ho, dean of the school of business at Hong Kong Baptist University.

Other analysts said high-profile cases of legal, but questionable, practices by certain local companies underscore the sorry state of corporate governance standards in Hong Kong despite its stature as one of the world's leading international financial centers.

A case in point is PCCW and the howls of protests elicited by a controversial February shareholders' meeting in which a privatization proposal by its majority shareholders was passed, using means described last month by the Court of Appeal as a deal by "vote manipulation" and "a form of dishonesty".

Jamie Allen, secretary general of Hong Kong-based Asian Corporate Governance Association, said more needs to be done if the level of corporate governance in Hong Kong is to see an upgrade.

"Hong Kong needs some good news with respect to corporate governance and this can hopefully provide some impetus to encouraging more responsible corporate practices," he said.

In the case of PCCW, its majority shareholders resorted to the legal but questionable practice of share-splitting and this strategy enabled a privatization proposal to muster enough votes and get approved during a shareholders' meeting in February.

Share-splitting is a practice in which a single block of shares is broken into smaller lots, thus allowing holders of the smaller lots to cast their votes and influence the outcome of a shareholders' meeting.

Taking up the cudgels for PCCW's small investors, market regulator Securities and Futures Commission (SFC) questioned in court the use of the share-splitting tactic which enabled PCCW's majority shareholders to obtain approval of their privatization proposal.

While share-splitting has yet to be outlawed, efforts by the SFC and disgruntled PCCW shareholders to block the controversial manner of privatizing PCCW paid off, courtesy of last month's decision by the Court of Appeal which struck down the buyout bid for PCCW's small shareholders.

(HK Edition 05/13/2009 page15)