Review of HKEX Corporate Governance Code and Related Listing Rules

We refer to HLEX consultation paper on the review of the Corporate Governance Code and Related Listing Rules. We appreciate the opportunity to contribute our investor perspective to the reform of Hong Kong governance requirements.

Norges Bank Investment Management (NBIM) is the investment management division of the Norwegian Central Bank and is responsible for investing the Norwegian Government Pension Fund Global. NBIM is a globally diversified investment manager with HKD 13 trillion at end June 2024, 50 billion of which invested in the shares of 122 Hong Kong companies.

We welcome the proposals by HLEX to review the Corporate Governance Code and Listing Rules, aiming to raise governance standards in the Hong Kong market. We particularly welcome the suggested proposals on board independence and director tenure, director training, board evaluations, and overboarding. The proposals will improve governance practices in the market and enhance alignment with international best practice. Beyond the detailed suggestions in the consultation paper, on which we comment below, we suggest HKEX further considers the nomination process for independent directors, with a view to enhancing its legitimacy.

We welcome the proposal to require issuers to design a lead independent non-executive director (INED), should the company not have an independent board chair. We agree that the lead INED should have responsibility for enhancing engagement with investors and shareholders, and also believe that their mandate should be broader and deal with all situations where the board chair is conflicted. We also support the hard cap of director positions that an individual director can hold, but suggest lowering it to five and specifying the maximum number in cases where the director holds a CEO or chair position. Regarding the proposed “hard cap” of 9 years for INED tenure, we do not have a specific threshold in our own voting guideline, acknowledging that there is no uniform definition of independence across all markets, but we welcome requirements that help avoiding potential conflicts of interest.

We support the proposals on continuous professional development and agree that it should be mandatory for both existing directors and “first time directors”; we encourage HKEX to set a minimum amount of hours for the former as well. We support the suggested list of topics to be covered, underline the importance of boards identifying specific training topics based on the business strategy, and support a mix of internal and external providers for the training requirements. We similarly support the proposal to require regular board performance reviews and encourage HKEX to go further in expanding the remit to assessing individual directors’ and specific committees’ performance, as well as recommending external reviews. We also support the proposals on diversity, risk management and internal controls, and the board skills matrix. Our detailed response to the questionnaire can be found below.

We thank you for considering our perspective and remain at your disposal should you wish to discuss these matters further.

Yours sincerely

Carine Smith Ihenacho,
Chief Governance and Compliance Officer

Elisa Cencig,
Head of Policy Engagement