“High liability vs low benefit” was the headline in the Shanghai Daily when the newspaper reported on an exodus of independent directors from Chinese firms last December.
At least 40 of them had resigned in a month after a local court ruled that five board members at Kangmei Pharmaceutical should bear some of the responsibility for financial fraud at the firm and jointly compensate investors for a combined Rmb2.5 billion ($390 million) of losses. The quintet were each given fines of up to Rmb246 million although they collected less than Rmb200,000 a year each for their directorships at Kangmei.
The exodus is still going on, with Sina Finance reporting that more than 100 A-share firms notified their shareholders in April alone that one or more of their independent directors had resigned.
Someone bucking the trend is Laura Cha, the chairwoman of HKEX (the company which runs Hong Kong’s stock exchange), who is joining the board of Ant Group.
The fintech arm of internet giant Alibaba has been undergoing a corporate revamp after its megabuck dual-listing in Hong Kong and Shanghai disintegrated in late 2020. But the addition of the 68 year-old Cha is significant, many commentators think, because it signals another step forward in Ant’s efforts to regain favour with regulators.
Few people are more familiar with the regulatory mood in the Chinese stock markets, including Hong Kong’s, than Cha. Born in Shanghai and educated in the US, she was vice chair of Hong Kong’s Securities and Futures Commission (SFC) before her appointment as deputy chairwoman of the China Securities Regulatory Commission (CSRC) in 2001, reportedly at the invitation of then Chinese Premier Zhu Rongji.
Cha’s father-in-law Cha Chi-ming was also one of Beijing’s most trusted advisors on Hong Kong affairs before 1997. Still, the switch to the CSRC role was a surprising move for most market observers at the time, as Cha became the first (and only person to date) from outside mainland China to join the Chinese government at vice-ministerial rank.
Reports at the time postulated that she needed to forgo her US citizenship in order to be eligible for the CSRC post and she was also said to have taken a substantial pay cut (Chinese officials of the same rank only made about Rmb3,000 a month two decades ago, a huge drop on her income in Hong Kong).
Back then reformers within the Chinese government were trying to bring in more financial specialists as the country geared up for greater competition after entry to the WTO. At the CSRC, Lau served as deputy to Zhou Xiaochuan, who later became the governor of the People’s Bank of China. In charge of regulatory enforcements, she soon earned a reputation for toughness, alongside a nickname in the Chinese press as “inspect you to death” (a play on her name Cha Shi Mei Lun).
According to Jiemian, a news portal, Cha is also a staunch advocate of applying the same regulatory frameworks to internet financial services firms as those that already apply to more conventional banks.
Alibaba’s founder Jack Ma spoke out for a different philosophy shortly before Ant’s failed IPO in 2020 in remarks that were widely seen as dismissive of the banks and their regulatory bosses. Since than Ant has announced it will become a ‘financial holding firm’ under the supervision of the Chinese central bank.
Cha’s appointment is part of a bigger reshuffle that will increase the number of Ant’s independent directors to 50% of its board (three of the eight members are now women too). Last week the company also published an inaugural 94-page sustainability report that laid out its ESG commitments.
Bloomberg reported Thursday that Chinese regulators had started early stage talks on a potential revival of Ant’s IPO, although the CSRC said in a statement it had not conducted any assessment or research work regarding Ant’s listing plan.
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