Corporate governance in Hong Kong: Of privacy and opacity

“HONG KONG residents shall have freedom of speech, of the press and of publication.” So begins Article 27 of Hong Kong’s Basic Law. Those rights, ever delicate, are under attack. Just as troubling, so too is Hong Kong’s reputation as Asia’s most transparent financial market.

As part of its effort to modernise the city’s corporate rule book, the government proposed last year that full Hong Kong identity-card (HKID) numbers and home addresses no longer be required of directors. The idea attracted little attention at first. But in recent weeks several Chinese corruption scandals have been exposed by newspapers relying on analysis of such data (mainlanders with ill-gotten gains often stash them in Hong Kong). That has led to a row over the trade-off between directors’ privacy and the public good.

Many agree that home addresses need not be divulged: in Britain, for example, directors may provide a business address. But a surprising coalition now argues that the government must not obscure directors’ identity numbers. Since many local names are similar, the HKID serves as the only practical unique identifier available. Hiding several digits, as the government proposes, would make it hard to cross-reference databases to see executives’ cross-holdings or conflicts of interest.

Continent of dreams

  • Kings of the wild frontier
  • When the music gets you
  • Spread besting
  • Voting but not counting
  • Of privacy and opacity
  • Don’t go Zhou
  • Bonanza or bane
  • Robocolleague
  • Lee Chuek-yan, a trade-union leader and opposition legislator, cites examples of workers, who have been denied back pay by bosses professing bankruptcy, using identity numbers to track down other flourishing businesses owned by those same employers. Danny Lau of the Hong Kong Small and Medium Enterprises Association thinks only tycoons benefit from such secrecy: ordinary business people “benefit from more information because that means more trust”. Steve Vickers, a former senior police investigator, argues the reforms will make life easier for money-launderers and crooks.

    Conspiracy theorists have wondered if officials in Beijing, humiliated by exposés of corruption in the New York Times and elsewhere, have been putting the squeeze on Hong Kong’s government. In fact, these reforms were proposed before the recent scandals. Legitimate data-privacy issues arise, too. But the government has thrown away its chance of a fair hearing by attacking David Webb, a respected activist investor and online commentator.

    Troubled by the proposed reforms, Mr Webb published the sensitive directors’ data—all collated from public sources—on one convenient web page. Trouble came when the official privacy commissioner launched a “compliance check” on his publication, warning darkly that “misuse of personal data contained in public registers may be a contravention” of the data-privacy law. Mr Webb argues he is protected by Article 27; media outlets have rallied to his cause. But the legal cloud has forced him to take that page off his website.

    Mr Lee’s party will meet the government this month to try to halt the reforms, but his block lacks the votes to force a change. Jill Wong of King Wood Mallesons, a law firm, believes directors should be held to a higher standard than ordinary citizens but reckons the reforms are “likely to go through”. If so, Hong Kong will have scored an own goal.

    Article source: http://www.economist.com/news/finance-and-economics/21572803-hong-kong-making-its-financial-markets-less-transparent-privacy-and-opacity?fsrc=rss|fec

    Tags:

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    *