BlackRock Says Many Hong Kong Firms Ignore Minority Shareholdersby
Asset manager calls for better corporate governance standards
Shareholder engagement in Hong Kong still at an early stage
Hong Kong-listed companies, often dominated by families with substantial stakes, have been slow to address minority shareholder concerns, according to BlackRock Inc.
About one in four companies in the city have fewer than 30 percent of their shares that are tradable, according to data compiled by Bloomberg, and about 100 of those have a market value of more than $1 billion. BlackRock, the world’s largest asset manager, wants companies in Hong Kong to improve corporate governance standards and how they interact with shareholders, rather than simply meet requirements set by regulators.
“Shareholder engagement is quite new in Hong Kong,” Pru Bennett, Hong Kong-based head of corporate governance in the Asia-Pacific region, said in an interview. “If you look at Australia where you’ve got a market of really predominantly widely held companies, they have been engaging with their shareholders for decades.”
An increasing number of companies are responding positively to engagement efforts, according to BlackRock. That’s in part because shareholders such as BlackRock are engaging with them, said Bennett.
The firm, which holds a stake in more than 850 Hong Kong companies, last month posted on its website a set of corporate governance guidelines focused on the city. The aim of the document is to help companies understand how BlackRock assesses them from a governance perspective and how the firm is likely to vote on certain issues, Bennett said.
BlackRock in February urged other shareholders to vote against G-Resources Group Ltd.’s $775 million gold mine sale. It has said that investors should be compensated when a company sells most assets to change its focus to a different industry. G-Resources, which listed in Hong Kong in 1994, decided to focus on the investment business after selling the mine. The company said in June it has had talks with BlackRock about paying a special dividend.
The investment manager plans a separate guideline for mainland China this year, followed by Taiwan and South Korea. BlackRock has issued similar guidelines for the U.S., Canada, Latin America and Australia, and published one for Asia excluding Japan in 2013.