Hang Seng Bank voting recommendations
10 April 2003
Voting recommendations
| Company: | Hang Seng Bank Limited (HSB) |
| Stock code: | 0011 |
| Date of meeting: | 22-Apr-03 |
| Time of meeting: | 15:30 |
| Advice date: | 10-Apr-03 |
| Notice of Meeting: | Click here |
| Voting method: | Webb-site.com will require a poll, all proxies will be counted |
Note to journalists:
We have up to 4 proxy seats available inside this AGM. Please contact
us if you want one.
| Item | Description | Vote |
| 1 | To adopt the accounts | FOR |
| 2(a) | To re-elect Y T Cheng | AGAINST |
| 2(b) | To re-elect Richard Y S Tang | AGAINST |
| 2(c) | To re-elect Peter T C Lee | AGAINST |
| 3 | To re-appoint KPMG as auditors | FOR |
| 4 | To mandate the Directors to repurchase shares on-market | FOR |
| 5 | To mandate the Directors to issue additional shares | AGAINST |
| 6 | To mandate the Directors to issue additional shares up to the number of share repurchased | AGAINST |
| 7 | To amend the Articles of Association of the Company | FOR |
Reasons AGAINST
In writing these recommendations, we note that HSB is 64.13% owned by HSBC Holdings plc. Therefore minority shareholders will not be able to overcome the will of the parent. However, all votes will be conducted on a 1-share-1-vote poll basis (thanks to Project Poll), so please vote to register your opposition or support to the above resolutions. By registering this opposition, you will help to achieve change in the corporate governance of Hong Kong.
We are disappointed to find conflicts of interest for all 3 candidates for independent directorship, and we also note that the general mandate to issue new shares (resolution 5 and 6) does not meet the criteria applicable to UK companies, even though HSB is majority-owned by a UK plc which has to meet such standards in the UK market.
Item 2(a)
Cheng Yu-Tung (Mr Cheng), aged 77, has been a director of HSB since 1985. He is proposed for re-election as an independent non-executive director (INED). He is Chairman and controlling shareholder of New World Development Co Ltd (NWD, 0017), which has been struggling under its debt burden for several years.
The extent of the loans and deposits between NWD and HSB is unknown, but NWD lists HSB and its parent, The Hongkong and Shanghai Banking Corporation Ltd (HSBC, 0005) as "Principal Bankers" in its annual report (where bankers are listed alphabetically), while its subsidiaries, New World Infrastructure Ltd (0301), and New World China Land (0917) both put the two banks at the top of their list of "Principal Bankers". We regard these relationships as a potential conflict of interest for Mr Cheng, and so cannot regard him as independent of HSB.
Lee Quo-Wei, Honorary Chairman of Hang Seng Bank, has been a director of NWD since 1972. Ho Tim, aged 94, is a director of HSB and also a director of NWD since 1972. Michael Sandberg, former Chairman of HSBC, has been a director of NWD since 1987 (just after he left HSBC) and was a director of NWD from 1972-1977.
These three are listed as INEDs of NWD, and the cross-directorships are a further potential conflict of interest for Mr Cheng. Another executive director of NWD, David Sin Wai Kin (Mr Sin), is also an INED of HSB, but is not up for re-election this year. If he were, we would oppose his re-election for the same reasons.
Item 2(b)
Richard Tang Yat Sun (Mr Tang), aged 50, is Vice Chairman of King Fook Holdings Ltd (King Fook, 0280) and a director of Miramar Hotel and Investment Co, Ltd (Miramar, 0071), which owns 15.6% of King Fook. Miramar lists HSB and its parent HSBC as 2 of its 5 principal bankers, at the top of a non-alphabetic list. King Fook lists both banks as principal bankers. Again, we regard these relationships as a potential conflict of interest for Mr Tang and so cannot regard him as independent of HSB.
Ho Tim, a director of HSB, is Honorary Chairman of Miramar and a director of King Fook. The cross-directorships represent a further potential conflict of interest for Mr Tang.
Side note:
While it is not relevant to HSB's meeting, there is a tangled mess of cross-directorships between HSB, NWD, Miramar and King Fook, which will be relevant to those companies. This is so complicated that a table is the best way to describe it:
| HSB | NWD | King Fook | Miramar | |
|---|---|---|---|---|
| Mr Cheng | INED | Ch | ||
| Peter Cheng Kar Shing | MD | INED | ||
| Mr Sin | INED | ED | INED | |
| Mr Tang | INED | Vice Ch | Dir | |
| Ho Tim | Dir | INED | Hon Ch | |
| Lee Quo-Wei | Hon Ch | INED | ||
| Howard Yeung Ping Leung | INED | Ch | Dir |
As you can see from the above, the Chairman of King Fook is an INED of NWD, while the Managing Director of NWD (son of Mr Cheng) is an INED of King Fook. That's a conflict for both individuals.
Item 2(c)
Peter Lee Ting Chang (Mr Lee), aged 49, was appointed as an INED by the board of HSB on 1-Aug-02. This followed the retirement of his relative Lee Hon Chiu as an INED of HSB on 23-Apr-02. The older Lee had been a director of HSB since 1986, so the younger is carrying on a "family tradition of being independent", you might say.
However, Mr Lee is Chairman of Hysan Development Co Ltd (Hysan 0014) and a member of its founding family. He succeeded Lee Hon Chiu in that position in 2001.
Hysan lists only two principal bankers in its annual report: HSB, and its parent, HSBC. Again, we regard the loans or deposits as potential conflicts of interest for Mr Lee and cannot regard him as independent of HSB.
Items 5 and 6
Webb-site.com urges all investors to vote against the general share issue mandate for the reasons explained in Project Vampire. We note that the general mandate sought by HSB is limited to 10% of issued shares, rather than the 20% common in Hong Kong, but this still falls short of the 5% standard set in the UK, where HSB's parent is listed.
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