1. An analysis of
independent non-executive
directors at Hang seng
index companies
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2. 2
1. Market Capitalization as of 9/30/2014
2. MTR Corp is 76% owned by Hong Kong Government
HK & Chinese POEs (24)
Total market capitalization
USD 582 Billion1
Chinese SOEs (22)
Total market capitalization
USD 1.6 Trillion1
Global & Regional Companies – Not held by PRC government-controlled entities
and deriving more than 50% of revenue outside Greater China
Chinese SOEs – Companies where PRC government-controlled entities have
controlling interest and deriving more than 50% of revenue within Greater China
HK & Chinese POEs - Companies not held by PRC government-controlled
entities and deriving more than 50% of revenue within Greater China
Global
& Regional
Companies (4)
Total market capitalization
USD 326 Billion1
Methodology
„„ Russell Reynolds Associates undertook an analysis of the Boards of Directors for all the
companies that comprise Hang Seng Index.
„„ The study analyzed:
–– The structure and composition of each Board
–– The connectivity between Boards
–– The background and experience of the 232 independent non-executive directors (INEDs)
sitting on these Boards
„„ In total, we analyzed the boards of 50 companies. Companies were grouped based on their
ownership structures and market emphasis into one of three categories: Chinese State-Owned
Enterprise (Chinese SOEs), HK & Chinese Privately-Owned Enterprise (HK & Chinese POEs)
and Global & Regional Companies.
A snapshot of companies
included in our analysis
2
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3. 3
INEDs and foreign
directors as a share of
all of Board Members
Average number of INEDs on the
board
560
Directors
of whom...
232 (41%)
are INEDs
of whom...
87 (16%)
are Foreign
Directors
Basic Board Composition
„„ There are 560 directors across Hang Seng Index companies, 41% of whom are INEDs
„„ Board size across all company categories varies between 7 and 22 members, with an average
size between 12-13.
„„ Average number of INEDs on boards varies depending on company type, from less than 5 for
Chinese SOEs to 6.5 for Global & Regional Companies.
Global & Regional Companies
6.5
4.8
Chinese SOEs
6.0
HK & Chinese POEs
Average Board Size
Global & Regional Companies
12.5
12.5
Chinese SOEs
13.5
HK & Chinese POEs
The smallest board has 7members The fewest INEDs on the board: 3
The largest board has 22members The most INEDs on the board: 12
Min Average Max
INEDs as a share of all board members, by company type
Global & Regional
Companies
HK & Chinese POEs
Chinese SOEs 38%
75%
92%
70%
29%
24%
27%
53%
45%
* Data as of 9/30/2014
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4. 4
Age distribution of INEDs
Hang Seng Index S&P 1500
INED Tenure
Tenure of INEDs by company TYPE
6% 4%
38% 32%
23%
29%
32% 35%50 to 59
50 to 59
Below 50 Below 50
67+ 67+
60 to 67
60 to 67
30%
23%
Appointed
within last
4 years
Appointed in
last 4 to 8 years
47%
Appointed over
8 years ago
INEDs demographics
„„ Age distribution of INEDs for Hang Seng listed companies is similar to that for S&P 1500 Index
companies, with roughly one third of them over 67 years old.
„„ 35 companies have INEDs with tenure over 8 years, across all company types.
„„ In terms of INED tenure, almost half of them were appointed over 8 years ago.
Note: typical INED term is four years, so INEDs with tenure of over eight years would normally be serving their third term on the board.
Tenure below 6 years Tenure between 6-8 years Tenure above 8 years
GLOBAL & REGIONAL
COMPANIES
HK & CHINESE POEs CHINESE SOEs
65%
27%
8%
37%
50%
13%
65%
27%
8%
* Data as of 9/30/2014
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5. 5
INED Gender Diversity
„„ 28 boards do not have women INEDs on them. For comparison, since June 2014 all FTSE100
companies have at least one woman on their boards.
„„ The share of women INEDs differs by company type. Women make up about 19% of all board
members at Global or Regional companies, but one-tenth of boards at HK and Chinese POEs
and Chinese SOEs.
„„ Almost 11% of the INEDs are women. This is lower than at other major exchanges. For
comparison, women directors constitute 21% of all directors for the ASX 50 and 15% for the S&P
1500.
Gender Diversity By company Category
Gender Diversity across countries
Hang Seng Index
– INEDs
Hang Seng Index
– All Directors
ASX 50** S&P 1500**
89%
11%
90%
10%
79%
21%
85%
15%
Global & Regional
Companies HK & Chinese POEs Chinese SOEs
Min Average Max
3%
Women INEDs as a share of all board members, by company category
Global & Regional
Companies
HK & Chinese POEs
Chinese SOEs
38%
20%
13%
0%
0%
0%
11%
5%
Global or Regional Companies have
women on their boards
2 4out
of (50%) 12 24(50%)
out
of (36%)8 22out
of
HK & Chinese POEs have women
on their boards
Chinese SOEs have women
on their boards
* Data as of 9/30/2014
** includes all directors
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6. 6
96.49 mm
Continental
European
British
North
American
Southeast
Asian &
Japanese
Australian
& New Zealand
44%
6%
25%
19%
6%
INED Nationality
„„ 39 Hang Seng Index companies have foreign INEDs on their boards, including all global or
regional companies.
„„ Average share of foreign INEDs varies by company type, from a third in Global & Regional
Companies to one in ten for Chinese SOEs.
„„ Most foreign INEDs come from Britain or North America.
Foreign INEDs by Company Category
Foreign INEDs as a share of all board members, by company TYPE
Global & Regional
Companies
HK & Chinese POEs
ChinESE SOEs
Min Average Max
10%
69%
46%
40%
7%
0%
0%
34%
18%
Global & Regional
Companies HK & Chinese POEs ChinESE SOEs
All Global or Regional Companies have
foreign INEDs on their boards
HK & Chinese POEs have foreign INEDs
on their boards
Chinese SOEs have foreign INEDs
on their boards
4 4out
of (100%) 20 24(83%)
out
of (68%)15 22out
of
Nationality of foreign INEDs
* Data as of 9/30/2014
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7. 7
INED background and Experience
„„ Chinese and foreign INEDs often bring diverse background and experience to the board.
„„ Experience in government or with regulators is common for both Chinese and foreign INEDs,
with almost a third of Chinese INEDs bringing experience of working with the Chinese
government or regulators, while for foreign INEDs this experience usually has an international
focus.
„„ Banking or investment experience is common for both Chinese and non-Chinese INEDs, with
almost half of each group having worked for a bank or investment firm at some point in their
career.
„„ A finance or accounting background is slightly more common among foreign INEDs, while legal
experience is more common among Chinese INEDs.
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
Finance or Accounting
Experience
Chinese INEDs Foreign INEDs
14% 23%
77%86%
Greater China Government or
Regulator experience**
Foreign INEDs
32%
3%
97%68%
Non-Greater China Government
or Regulator experience
Chinese INEDs Foreign INEDs
1% 15%
85%99%
Banking or Investment
Experience
Chinese INEDs Foreign INEDs
41% 46%
54%59%
Academic Experience
Chinese INEDs Foreign INEDs
14%
6%
86% 94%
Legal Experience
Chinese INEDs Foreign INEDs
11%
2%
89% 98%
* Data as of 9/30/2014
** Note: CPPCC membership not counted in sample
Chinese INEDs
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8. 8
Board Connectivity
„„ The graph below illustrates how Hang Seng companies are connected through INEDs, NEDs
and Executive Directors sitting on their boards.
„„ There are 32 INEDs sitting on multiple Hang Seng boards, and 36 companies share at least one
INED with another Hang Seng Index company.
„„ Two key observations about board interconnectivity:
–– All but one Global & Regional Company share a director with Hong Kong & Chinese POE
Boards, but no Global & Regional Company share a director with a Chinese SOE.
–– There are 5 HK & Chinese POEs, 3 Chinese SOEs and 1 Global & Regional Company with no
links to any other Hang Seng Index company board.
Hang SenG index companies – board connections
Global and Regional Companies
HK & Chinese POEs
Chinese SOEs
Board Interconnectivity
Key
Size of bubble indicates board size, e.g:
Color of bubble indicates type of company, i.e.:
21 8AIACheung
Kong
Galaxy
Enter-
tainment
Bank Of
China
Citic
Pacific
Tingyi
Kunlun
Energy
Sino
Land
Hang
Lung
Properties
Henderson
Land
Develop-
ment
Bank Of
Commun-
Ications
China
Mengniu
Dairy
BoCHK
China Life
Insurance
China
Merchants
Hengan
International
Petrochina
China
Shenhua
Energy
China
Overseas
Land &
Invest-
ments
Cosco
Pacific
New
World
Develop-
ment
Bank Of
East Asia Hong
Kong &
China
Gas
Li &
Fung
Sun
Hung Kai
Properties
Swire
Pacific
Hong Kong
Exchanges
& Clearing
Cathay
Pacific
Airways Power
AssetsHang
Seng
Bank
AIA
Hutchison
Whampoa
Cheung
Kong
Ping An
Insurance
China
Construction
Bank
China
Unicom
CLP
Wharf
Belle
International
Tencent
Sands
China
Lenovo
Group
CNOOC
Sinopec
China
Resources
Land
MTR
Corporation
China
Resources
Power
China
Resources
Enterprise
China
Mobile
ICBC
Want
Want
HSBC
* Data as of 9/30/2014
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