Views on improving the integrity of global capital markets
04 August 2014

Corp Gov Roundup: In Alibaba Aftermath Will Hong Kong Stick to “One Share, One Vote”?

It’s time to span the corporate governance globe to review important developments from the month of July.


Canada took one more step towards establishing a national securities regulator in July when Canadian provinces Saskatchewan and New Brunswick agreed to join a voluntary national securities regulator expected to launch in the fall 2015. Ontario and British Columbia signed on last year. Most importantly, the four provinces now in agreement to join the plan represent more than half of the market cap of firms listed on major exchanges in Canada.

Hong Kong

Regulators in Hong Kong have received praise recently for standing their ground on the “one-share-one-vote” principle that prompted Alibaba to announce plans to move its IPO to the United States (Hong Kong authorities would not change rules to allow for the dual-class share structure desired by Alibaba management). It appears, however, that Hong Kong’s Financial Services Development Council (FSDC) is concerned that such a stance could cause Hong Kong to miss out on future high-profile IPOs.

The FSDC recently published a paper, Positioning Hong Kong as an International IPO Centre of Choice, which states that regulators should look into a diversification of the IPO market and more alternative business forms, and study the one-share-one-vote concept in an open forum under public consultation.

Expect to see more on the issue of one share, one vote in Hong Kong and other markets in the coming years.


Regulators in Italy recently decided to allow issuers to grant double voting rights to shares held longer than two years. The new rule states that the multiple voting rights may not be used as a takeover defense, but the mechanics of the multiple voting scheme may prove onerous for shareholders.

Only the holders of registered common shares will qualify for the multiple voting rights. This decree violates the preferred one-share-one-vote policy supported by CFA Institute because it does not treat all shareowners equally. There is some concern that adding the extra step of share registration in the share-voting process could disadvantage some investors who may not have seen the new rule or fail to understand the mechanics of it. It is therefore possible that investors who are entitled to double voting under the rule could fail to obtain these rights, potentially allowing a small group (with small actual ownership) to control a company’s voting results.

Such multiple voting shares also may serve to increase government control of state-owned companies in which the government does not own 50% of the equity.


In Japan, the Ministry of Economy, Trade and Industry corporate governance study group published guidelines for outside directors. The report states that by implementing these guidelines, Japanese listed companies may gain confidence from within Japan and overseas. The guidelines are based on best practices of Japanese companies that the study group interviewed as well as the corporate governance codes of European countries.

In addition to guiding firms in how best to add outside directors to their boards, the report focuses on the issue of a separate chair and CEO as well as best practices around investor engagement.


With other news coming out of Russia lately, please forgive us for originally missing a change in listing rules at the Moscow Exchange. The new rules require companies in the highest listing level to have at least 20% of directors and no fewer than three directors to be independent. Issuers’ boards are required to create audit, personnel, and remuneration committees comprising a majority of independent directors.


Compensation specialists Freshwater Advisers recently released an executive compensation study in Singapore. The survey of 300 companies listed in Singapore found that only about half of the 30 highest-paid CEOs among Singapore-listed companies had long-term incentive packages that aligned their interests more closely with those of shareholders.

Those that don’t comply are falling foul of Singapore’s 2012 Code of Corporate Governance that states performance-related pay should be aligned with shareholders’ interests and that companies must disclose exact levels of executive pay or provide a reason for not complying. Of the companies in the survey, 29 chose not to comply with the governance code on this matter, often citing concerns about giving away information that would harm the company to disclose.

Also in Singapore, this year’s Governance and Transparency Index ranking the governance and transparency of companies in Singapore was released by CPA Australia, NUS Business School’s Centre for Governance, Institutions and Organisations , and the Business Times. For the 2014 edition, the index aims to reflect key trends in Singapore’s corporate governance, examining governance practices at 644 Singapore-listed companies that released 2013 annual reports before 31 May 2014. The report finds that many listed companies have adopted the 2012 Singapore Code of Corporate Governance.

United States

About a month ago, the SEC issued long-awaited guidance on the use of proxy advisers by investors. The guidance is just that — guidance, not a rule, but it should clear up some doubts about SEC policy and some requirements of investors in voting their shares in publicly traded companies. For example, they don’t have to vote their shares. The guidance gave the green light to funds to abstain from voting in some instances, whereas many investors had assumed that they were required to always cast a vote in every instance. Some issuers and investors had expressed concerns in the past that they were required to cast thousands of votes, preventing them from making informed decisions because of limited resources. However, they did not wish to simply outsource their voting to a proxy advisory firm. The guidance also calls on advisers to disclose more specifics about potential conflicts of interest, and not to simply rely on “boilerplate” disclosure.

Issuer groups have long complained that proxy advisory firms skew voting in US corporates due to the number of investors who have felt compelled to vote, and according to these business groups, simply outsource their voting to proxy advisers. Now that the SEC has given such investors the explicit permission to abstain from such votes, it will be very interesting to see voting results next proxy season. We will see just how much influence these proxy advisers have had on such votes.

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Photo credit: iStockphoto/iStockphoto/YinYang

About the Author(s)
Matt Orsagh, CFA, CIPM

Matt Orsagh, CFA, CIPM, is a senior director of capital markets policy at CFA Institute, where he focuses on corporate governance, ESG, and climate change analysis. He writes and speaks frequently on these topics on behalf of CFA Institute. His paper, Climate Change Analysis in the Investment Process was named “Best ESG Paper” by Savvy Investor in 2021.

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