Disclosure requirements of HK Listing Rules state
that if a director has significant holdings, and if this
fact is likely to affect the benefit of a corresponding
listed company, he/she must disclose the holdings in
the ‘Directors’ Interests in Competing Business’
section of the Annual Report. As of 31 March
2002, any interests that directors have in competing
businesses must be disclosed pursuant to Rule 8.10 of
the Listing Rules. Holding shares of other listed or
private companies in related industries may trigger
this disclosure requirement. In HK, 12% of Executive
Directors (EDs) and 6% of Non-executive Directors
(NEDs) have conflicts of interest with the listed
company that employs them. Although this is a small
percentage, it can seriously affect a board’s independence
and compromise the effectiveness of its monitoring
activity. It is also interesting to note that some
INEDs have conflicts of interest with the company
even though they are supposed to be completely
independent of the firm. Nevertheless, the incidence
of this is low and does not disrupt the distribution.