HKEX tightens board diversity and independent directors' requirements

Hong Kong Exchanges and Clearning has tightened policies to promote listed company diversity and board refreshment.

Bonnie Chan Yiting, head of listing of HKEx, said 12.7 percent corporate directorships were held by women in 2020, which is a slight increase compared with the 12.4 percent in 2019.

However, she said 20 percent of lPO applicants that listed in 2020 have a single gender board. The stock exchange has asked these companies to appoint at least one female director within two to there years.

Companies with a single gender board will not be considered to have achieved diversity when they are applying for listing, according to a newl consultation paper on reviewing the corporate governance code and related listing rules.

Chan believes diversity should not only be on the board, but also in the workforce, especially in the senior management level.

HKEx will also tighten the threshold of the re-election of long serving independent non-executive directors – those who serve for more than nine years – to promote refreshing of the board and succession planning.

Chan says that such re-election should be subject to independent shareholders’ approval, and additional disclosure on the factors considered, the process and the board or nomination committee’s discussion in arriving at the determination in the explanation on why such a director is still independent and should be re-elected.

In circumstances where all independent non-executive directors are long serving, HKEx proposed introducing a new requirement for issuers to appoint a new independent non-executive director at the forthcoming annual general meeting, and disclose the length of the tenure of the long serving independent non-executive directors on the board on a named basis in the shareholders’ circular.