Ogier attended the AIMA Japan Hedge Fund Forum last month, which celebrated its 10th anniversary.  The word on everyone’s lips, “corporate governance”.  It seems late in the day to be talking about corporate governance but here we are more or less 7 years on from the financial crisis and in Asia it is an area of focus.  Whereas the UK, which is said to sit at number 1 on the corporate governance charts, instigated its corporate governance policy back in 1992, the Asian markets are now also picking up the pace.  Singapore issued its new and revised corporate governance code (CGC) in May 2012 including tighter standards for independent directors. Also in 2012, the Hong Kong Stock Exchange amended the Code of Corporate Governance and Corporate Governance Report with respect to remuneration committees, board independence and pay disclosures. Japan’s first standalone CGC came into effect on 1 June this year. 

Key themes discussed at the forum were the independence of directors, the skill and experience of directors appointed to the boards of funds, the structure of the board and the amount of time and attention given to the company by its directors.  The intended output, good governance of companies by making directors accountable and requiring companies to comply with a set of policies and procedures with the aim to achieve medium to long term success for the company.   Of course in Japan we are more used to seeing Japanese unit trusts serving as the vehicle of choice for investment funds and so in fact these structures have traditionally already had an independent body, the trustee, overseeing the management and administration of the fund.  The message for trustees might be the importance of exercising this role with true independence and not to hold themselves accountable to the investment manager.

What we are seeing here in Asia generally accords with what our counterparts are seeing in Europe and America.  Independent directors are now, more than ever, seen as an essential part of the due diligence process for investors and not just for tax structuring considerations, but corporate governance ones as well.  We expect the demand for truly independent, professional, skilled and non-apathetic directors to continue to rise in these markets.

Report by Kate Hodson who is based in Ogier’s Hong Kong office.

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