insurances include special terms and conditions firms must meet if the
cover is to be valid or the premiums reduced, but these can sometimes
be tricky to spot without the help of an insurance expert.
enterprises should also be wary of "package" policies, including
"free" liability insurance. This type of policy is designed
to cover shops and restaurants, but will not necessarily take into account
the particular requirements of a business.
find a broker to help tailor liability cover to their own needs, to
add extension clauses, delete exclusions and work out how best to keep
premiums down," advises Lui.
He argues that
a broker, who acts on behalf of the policyholder and can shop around
for cover, is a better option than an insurance agent, who may be selling
policies on behalf of a small number of insurers.
Lui says brokers
have a valuable role to play in alerting smaller firms to their potential
liabilities, adding that the business community is only just beginning
to become aware of the need for liability insurance.
"We have had
some difficult economic times in Hong Kong and many small businesses,
even if they were aware of potential liabilities, were restricted by
budget," he notes. But times have changed, he says, and smaller
companies "need to wake up and talk to brokers".
Chan urges firms
not to be deterred by the idea that cover might be costly. "Liability
cover is not as expensive as you'd think," he says. "The cost
is still cheaper in Hong Kong than in many other developed countries."
And Chan believes
that, as the community becomes increasingly aware of its legal rights,
smaller firms must become insurance aware. "In Hong Kong, insurance
is still sold rather than bought," he says. "That culture
needs to change."
is attracting more attention than ever in Hong Kong. Making sure that
decision-making processes, directors' pay and share transactions are
all above board and able to withstand tough scrutiny is important even
for smaller companies.
According to Insurance
Commissioner Richard Yuen, "increasing importance is being placed
on corporate governance, so there is also an increasing need for company
directors - including independent directors - to think about better
Asia Pacific Underwriting
Agencies (APUA) Hong Kong general manager Paul Bermon agrees. "Changes
in the law in Hong Kong and throughout Asia are making people more aware
of transparency, and they will sue if they don't get it."
officers' liability insurance can protect firms against these types
of financial claims and, like any other liability insurance, should
be tailored to suit the requirements of a business.
Policies can include
employment practices liability cover (which protects against claims
for discrimination or sexual harassment, for example) and cover for
claims arising from regulatory issues. "As more power is given
to the financial authorities, there is a greater risk of falling foul
of some of those procedures," Bermon notes.
He points out that
the problem is not necessarily the amount claimed, but the legal costs
can be huge - not to mention the time and effort it takes to defend
Bermon urges small
firms to be more aware of these new risks. "The compensation culture
is definitely here and getting worse," he insists. "But firms
are blind to it until they start paying the legal costs."
BY SUZANNE MOORE
A Culture Of Compliance
|On track: Hong
Kong's corporate culture is moving towards greater transparency
is a buzz phrase that is becoming increasingly popular beyond professional
circles. However, it is also often poorly understood, largely because
it covers a potentially enormous number of distinct economic phenomena.
Simply put, corporate
governance is about promoting corporate fairness, transparency and accountability
to an organisation's many stakeholders, including staff, suppliers,
bankers, customers, the media and the general public.
It's a concept
that is gaining ground in Hong Kong, where there are substantial signs
that a generational change in attitude is taking place, and a trend
to which small- and medium-sized enterprises (SMEs) are not immune.
Hong Kong Institute
of Directors chairman Herbert Hui points to the popularity of the institute's
training programmes for directors as proof of the need for companies
of all sizes to develop and implement relevant corporate governance
"We have a
series of programmes and courses to meet different requirements,"
he says. "For instance, we can offer elementary courses for newly-inducted
directors, or intensive and more directional courses for more experienced
He says these courses
offer variety of content, and the institute can also provide a variety
of organisers. "There is a thriving service supply situation, and
through us a client can choose among courses on offer from a number
of commercial operations as well as from some academic institutions,"
He points out the
fact that executives are prepared to pay for their own training underlines
the change in corporate culture that is underway in Hong Kong.
courses are paid for by the individuals concerned, since they only cost
a few thousand dollars," Hui notes. "Many conscientious directors
take responsibility for augmenting their own professional abilities."
Perhaps the institute's
greatest innovation is the training schemes for would-be listed company
directors, the executives of Hong Kong's overwhelmingly important SME
somewhat different requirements and are in a different situation to
listed company directors," Hui explains. "Directors of SMEs
will find that they are starting to need a corporate governance track
record in order to establish business relationships and to keep their
business options open at all levels."
However, he admits
that some SMEs find it hard to justify the cost of corporate governance
training. "Perhaps the link between profit and training is not
so directly established in the SME community, but we are a two-level
system, and we can see the difference that director training can make
to these companies," Hui says.
His opinion is
shared by others, such as the Hong Kong government's former permanent
secretary for financial services and the treasury (financial services),
legislate for ethics, and a society has to be led rather than bullied
into a particular direction," he observes.
culled from today's marketplace, he feels, indicates that a corporate
culture is being created whose ethics are relevant to today's business
"From a situation
where there was an absence of shareholder democracy, we now have multiple
advocates and avenues for the expression of minority shareholders' rights,"
He adds that the
Hong Kong Institute of Directors recently proved this point by providing
SMEs with pre-listing training and selling out its courses. "If
anything points to a deep cultural change, this does," Miller maintains.
Miller feels that
this change is ongoing, and he admits that it has not been easy shepherding
changes in corporate reporting and boardroom behaviour through the Legislative
of vested interests, changes in Hong Kong's regulatory processes have
to be measured, continuous and incremental," Miller believes. "It's
also important to make sure that the proposals are not more than the
system can bear, so people can accept such important changes as dual
filing and statutory backing for regulations."
Hong Kong Exchanges
and Clearing Ltd chief executive Paul Chow, speaking with particular
reference to SMEs, says there is room for improvement and admits rules
cannot regulate for common honesty.
"This is a
matter of ethics and integrity, and it is a question of changing the
culture so that compliance is easy and effective for issuers,"
Chow observes that
there is also a difference in the way compliance is perceived in Hong
Kong; noting that the mainland, for example, has strict supervisory
"But in Hong
Kong we rest on a series of checks and balances, with a demutualised
exchange, an independent regulator, government-appointed listing committee
members and the Independent Commission Against Corruption," he
"This is our
philosophy - we have multiple checks with a regulatory overlap."
Regardless of the
compliance system, however, there is obvious agreement that Hong Kong's
corporate culture is on track to greater transparency and investor-friendliness.
There is also unanimous
accord that the process is ongoing, involves continuous improvement
and that SMEs and listed companies alike ignore the ramifications of
corporate governance at their peril.
The Hong Kong Institute
of Directors believes that good governance is essential, not just for
listed companies but also for SMEs. As a consequence, the institute
has started to offer training catering to the specific needs of SME
This is principally
presented in the form of seminars and forums on the various challenges
and tasks that SME directors face. A pass in this course work leads
to the granting of a professional diploma in SME directorship, which
can have ongoing benefits for both individuals and companies after a
The institute is
concerned to ensure that two sets of parallel skills are developed,
namely those relating to: