ȶറюီٱዩȷᐣ۩ுк John Seto Gin Chung: Checks and Balances ѧ৶ਏϛፙڙᒋϞၾ ! " " ѧ৶ਏϛӑҡϷٴᄇᐿҳီَޟ࡙ڙٱ၌ !ചџݠ M r John Seto Gin Chung is a veteran in the securities and futures industry with more than three decades of experience, having led and served on the boards of many listed entities. To him, helping management install the right checks and balances as well as gauge risk are core responsibilities of an independent non-executive director. “We believe our role is to help the company look at things from an independent point of view without being a vested interest in this entity either as a customer, an employee or a shareholder,” says Mr Seto, who has been an independent non-executive director for China Everbright Limited (China Everbright), a financial services firm with operations in Hong Kong and the Mainland, since 2003. “You can’t say there shouldn't be any risk because no risk means no reward, but how to take good risk and generate the best reward? This is where we think our independent views can help management make China Everbright a better company.” Tighter Control A cautious approach to risk management has served China Everbright well as it transformed itself from a brokerage 22 HKIoD: THE 21ST CENTURY DIRECTOR business into a private equity and fund management firm over the past decade. Since the 2008 global financial crisis, tighter risk management has become all the more critical, according to Mr Seto. “The crisis was somewhat of a sobering reflection of what could go wrong. Certainly with that, you have to be even more careful as to what is really important in terms of checks and balances,” he says. “I always believe that if we cannot control something, we shouldn’t do it; if we don’t understand something, we shouldn’t do it; and if we don’t have the right people and the right structure in place, we shouldn’t do it.” Before China Everbright set up its Absolute Return hedge funds in 2012, Mr Seto says the independent directors questioned management at various stages to ensure that proper risk controls were in place. For example, they asked whether the right computer system was installed and whether the managers understood what the risks were and signed off on them; internal audit was also asked to perform more regular reviews as the funds were a new investment involving higher risk and high volatility. “From the audit committee’s perspective, we made sure that these things were done before we agreed to allocate more money,” he says. Last year, Mr Seto won the Director of the Year Award in the category of NonExecutive Directors of Listed Companies (SEHK – Non-Hang Seng Indexes Constituents) for his ability to provide thoughtful input on strategic planning and corporate-governance issues to his company’s executive team. Through-Train China Everbright Limited, a member of China Everbright Group, owns 33.3 percent of Everbright Securities in Shanghai and a 49 percent stake in China Everbright Securities (HK) Limited in Hong Kong. With Beijing’s announcement of a through-train share-trading scheme between Hong Kong and Shanghai in April, China Everbright Limited looks poised to benefit from the development. “We can trade through China Everbright Securities as the vehicle to go into the China market," says Mr Seto. Under the scheme, Mainland and Hong Kong retail investors will for the first time be allowed to cross-trade stocks listed in Hong Kong and Shanghai up to a total quota of 550 billion yuan. The Hong Kong government said the stock exchanges and regulators on both sides are working to resolve the scheme’s operational and cross-border regulatory challenges before its planned launch in October. Mr Seto expects a lot of initial interest from Mainland investors to buy stocks of Mainland companies that are only listed in Hong Kong, while Hong Kong and foreign investors are expected to buy into the shares of domestically listed Chinese companies. He adds that following the scheme’s announcement, any arbitrage opportunities !" #$ % & '()*+ ҦਵКԐӠᖔশสၭڰᐯྻѹਯ൪ನࢥԐӠĩҽĪჴᝑijıIJĴՐ࢘൰ҍၭڰጨȄ between A and H shares would probably have already been done by the companies that have licenses and trading abilities in the Mainland and Hong Kong. He says it is too early to tell whether the trading scheme will have any implications on raising the corporate-governance standards of Chinese listed companies. Best Practice Mr Seto has developed a keen understanding of international corporate governance standards and best practices from his days serving as the chief executive officer of HSBC Broking Services (Asia) Limited and on the boards of Hong Kong Exchanges & Clearing Limited, First China Financial Network Holdings Limited, Kowloon Development Company Limited, and Sateri Holdings Limited. After he joined China Everbright Limited in 2003, he and other independent directors recommended a change in the reporting line of the Chief Risk Officer and the Head of Internal Audit: they were told to report directly to the audit committee rather than management. “The business of China Everbright involves trading and a lot of financial instruments where risk assessment needs to be quite independent,” Mr Seto says. “And reporting to the audit committee would eliminate the possibility of management pressure on the person in charge of reviewing risk. That’s how I see this check and balance works out.” He says the company’s audit committee meets at least quarterly. “We make sure that we get the internal audit and risk management reports and that we are updated on the state of the company and whether there are any problems that they have dug up and we need to be aware of,” he says. “That’s the most important thing.” Mr Seto encourages new directors to undergo training to gain a better understanding of how a board should be conducted and the role and duties of independent directors. “You don’t want to be sitting there just as a rubber stamp,” he says. “Your mindset is to be very clear as to what your role is and what you are there to do.” ॷ෫ီٱᏰོĻġġГΙжकီٱ 23 ȶറюီٱዩȷᐣ۩ுк ਵКԐӠԴᝋۓงറधᐾ գჅĴıՐ၃ᢚȂᑢԇԺਛ ϯҾᑟᅹߞၭྻڰѹਯ۶ၭ ڰȄҁሮऎȂׄᇒನኸ࢙ ӲᏋညߞۘᓊ۶লᔍᆾఠۘ࢘Ȃ࣏ᑾӲࠧ ே֖ၭߞڰѹঋᚚയȄ Ҧ ȶاሮऎاেߞᚚയ࣏ంࢉїȃᄌ৶ߵݕ ތѽҳێҁߞࠧૈ׀हᝯڗжȂంᑾӲڎ ࢘ᣍᅅгҦߞఐȄȷҦਵԐӠijııĴ ՐҍԇԴКสیԳ၃ᖉࠛᓉއசߞК ԍЂఠߵգনгҦĩКԍЂĪᑾӲࠧே֖ ၭڰȄ ȶְЙକሲЙᕕႍՅԴԇ֣লᔍȂԯऎٟ գলᔍබٟգඡȄᕕႍயՂ֣ࡂՀߞল ᔍȂంփᘇۤ൵ՀߞඡȄഺබ࣏اেߞ ᑾӲᣍᙇ෭֯ӡߞԳўȂକᕒׄᇒನ ኸـՀԳ၃ᖉКԍЂȄȷ ёᅿ КԍЂԴჅҝϩՐുَం၃॔гҦᚼ ऎټདྷߵӎфࠛᇒನгҦȂێКྕߞ লᔍᇒನܧґЙьȄҦਵԐӠࠑӯȂం ijııĹՐ᜕ԑಧࠛᓉԟᑟѽڽȂҐলᔍ ᇒನ؛ـদঋȄ ȶڤըԟᑟࣙ࢘ϯᢰϠᓹះतኃڰൌգ ҞକӠȄթթےȂְྻـѿࢥ༓ ࢨዹߞۘᓊۘ࢘ᝯদঋȄاᗁሮऎȂᅆ اݺে๑ޱఠۘߞڰఐȂاেЙႍҝஇȇ ᅆاݺেڭЙನႋߞڰఐȂاেЙႍҝஇ ȇᅆاݺেٟգᏋညߞϠЖ۶ᑟۘನߞ ڰఐȂاেЙႍҝஇȄȷ ҦਵԐӠࠑӯȂԴijıIJijՐКԍЂനӲທ ᅆ՜ૈᅆٞࠛࡈȂᑾӲၭڰฅԴЙԢ༥ ࣱԨᇒನኸ෩ҍᆷயȂѽፁ࠲гҦళۤϞ ᏋညߞলᔍᇒನనࣉȄڼՂҁে႙யгҦ ࣏ЏႅനᏋԪߞცၝڀȂѽф၃ನে ࣏ನႋݙઘলᔍڭПѽزȇᡦݺႍຈ ࣏ࠛઘфႵলᔍ۶ޯஜߞྲظႤȂ ҁেӺঋِаൊᅆێ་֖ـᔛߞܠง ࣤȄ '"& $' ,- ()*$ % & ҦਵКԐӠфশสၭڰᐯྻ֖ࣆᗁ໗ठൾЀ៷ݺijıIJĴՐ࢘൰ҍၭڰጨჴጨۏᚃȄ ޢٙ КԍЂఠߵգনгҦ៳КԍЂ༰ᄥᅮ ϭгҦȂᐾգϯઔԍЂᝋۓĴĴįĴĦфশสК ԍЂᝋۓĩশสĪգনгҦĵĺĦߵᡋȄᔌ Ҕڴည؊ݺұѡгҿȶᆡส഼ȷߵҾᛕԨ ߡ഼ژᄑȂჰงКԍЂఠߵգনгҦ ਣྻૈۦȄ ȶاেҞѽ഼ჅКԍЂᝋۓணሃКҾ ඞȄȷҦਵԐӠࠑӯȄ ҁݺijııĴՐҐϢКԍЂఠߵգনгҦࢢ ȂᗑԢێҁᑾӲၭؼـ៉࢙ڰলᔍᗁᆾ фаൊѹᇒߞབྷඡࣛᅹȈҁেജঋِߡ తԨ੮৶ྻփࠧᇒನኸབྷඡȄġ ੲᑂႍᄑȂКสیԳїظႤ߰ը କӹТᎱสȃᆡیԳߞϯҾߵೈȂѽ ᗁӹݽᛝĶĭĶııኆϠӔᅋऎϯনȄশสࣆܹ ࠑӯȂสᆡᛕўߞߵೈӹݙݽ۶ᆾᇒᑟᅹ Ӓ៸јႋٙᄑߞႻ֯۶ႭᄩᆾᇒயᛟȂ ѽՂงݺIJıѡయ֖Ȅ ȶКԍЂߞசઘфᎱ۶Ђ༓ࠛᓉЍۍ Ȃգቮঋ་֖ᑾӲߞলᔍໞ֤ȄߡతԨ੮ ৶ྻབྷඡȂҞڨፑᇒನኸᅆলᔍໞ֤യ ϠࣉᕅȄഺබ࣏اೀКգੜߞۘᓊۘ࢘Ȅȷ ȶం੮৶ྻߞऻ࢘ڎȂاে༷Ԑፁ ࠲ഺَڱᢼЏ၃؆ȂЖକԢྍኧҐዥ ภȄȷ ҦਵԐӠჰԴᄑࠐงധԺЂ൙ظႤ߰ ྻᅆҪԴশสϯҾߞаԳгҦߵೈྏᒸᎷ Ȃփশส۶ҳԳظႤ߰ࡋྻѕኇݺаԳϯ ҾгҦȄ ҦਵԐӠϘߡऎгҦߞᇒನᄥ༤෩ڻգᝯ ຉರഢᄑ۶ԋᇒߞᇁขྍڍȂҝՐـ ԯթᅷᖔႍՐ࢘ϯҾгҦࠧே֖ၭڰ־ ൰ҍၭڰጨȞশสӹݙݽġșșġࠧ㡱Ӡࢽዴ жߵȟȄ ҁϫࢽȂԴᄑгҿࢢȂłߵ۶ʼnߵН༡ߞ ਇ✂ᑟྻҞକЏജјࢺКสیԳ๕۶ӹ ݽକϧߞгҦఉዴᅁȄݺᄑᅆݺ෩ КϯҾгҦߞԋᇒዾգᠩ Ȃҁሮऎ༥ࣱЪڏНܥ՝Ȅ 24 HKIoD: THE 21ST CENTURY DIRECTOR ശٹலೣ ҦਵԐӠᑢԇ㣵ᚳࠛᓉއசĩࣷڲĪգনг Ҧ֖ࣆᗁ໗фশสᗑԪӹݙݽգনгҦȃ ົ၃ᇨປ༰ᄥգনгҦȃϝᔷ࢙գ নгҦфᘈఀ׀ఠߵգনгҦၭڰȂᅆ ቫԋᇒዾф൵ڸ௱ഢգಎϢϞႋȄ ҦਵԐӠࠑӯȂгҦߞ੮৶ྻ൵ьُܞ ༟ϘըྻȄȶاেঋۤఀаൊ੮۶লᔍᇒ ನඡטȃፁ࠲اে౻྾гҦߞ൵ྲߐȂѽ фϞႋҁে࣏ԇ֣யᛟڭфᢰاে ྍႍۖຈயᛟȄഺ࣏൵দঋߞϘᙇȄȷ ҦਵԐӠᄁᔽྲၭڰతۦைȂϞႋၭڰ ྻՂ֣Ⴛ֯ȂѽфᑾӲၭ֒ڎߞڰ۶ᚚയȄ ȶЙঋӟݺҪஇᑛөᄦൢȄְᕕႍᅆЎߞ ֒ڎ۶ᕕஇߞЍ֯Ϟ๒ݺѕȄȷҁሲȄ
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