|Board of Directors|
|Delegation by the Board|
|Accountability and Audit|
|Communication with Shareholders|
The Board has collective responsibilities for promoting the long-term sustainability and success of the Bank by providing entrepreneurial leadership within a framework of prudent and effective controls. In doing so, the Board commits to high standards of integrity and ethics.
According to the Board’s terms of reference, specific matters reserved for the Board’s consideration and decision include:
The roles of the Chairman and Chief Executive of the Bank are separate, with a clear division of responsibilities as set out in the Board’s terms of reference.
The Chairman of the Board is an INED who is responsible for the leadership and effective running of the Board and for ensuring that decisions of the Board are taken on a sound and well-informed basis and in the best interest of the Bank. The Chairman possesses the requisite experience, competencies and personal qualities to fulfill these responsibilities.
The Chief Executive is an Executive Director who ensures implementation of the strategy and policy as established by the Board. The Chief Executive is responsible for the management and day-to-day running of the Bank’s business and operations, and leads and chairs the Executive Committee.
As at the date of 2013 Annual Report, the Board comprises 14 Directors, of whom three are Executive Directors and 11 are Non-executive Directors (“NEDs”). Of the 11 NEDs, eight are INEDs. There is a strong independent element on the Board, to ensure the independence and objectivity of the Board’s decision-making process as well as the thoroughness and impartiality of the Board’s oversight of the Management.
The Board possesses, both as individual Directors and collectively, appropriate experience, competencies and personal qualities, including professionalism and integrity, to discharge its responsibilities adequately and effectively. In addition, the Board collectively has adequate knowledge and expertise relevant to each of the material business activities that the Bank pursues and the associated risks in order to ensure effective governance and oversight.
Members of the Board, who come from a variety of different backgrounds, have a diverse range of business, banking and professional expertise. Brief biographical particulars of the Directors, together with information relating to the relationship among them, are set out in the section “Board of Directors” in the Bank's website.
The Board considers that its diversity, including gender diversity, is a vital asset to the business. In May 2013, the Board adopted a Board Diversity Policy for better transparency and governance. Board appointments are based on merit and candidates are considered against objective criteria, having due regard for the benefits of diversity on the Board, including but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service. The Bank remains committed to meritocracy in the Boardroom, which requires a diverse and inclusive culture where Directors believe that their views are heard, their concerns are attended to and they serve in an environment where bias, discrimination and harassment on any matter are not tolerated.
The Bank has maintained on its website (www.hangseng.com) and on the website of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) an updated list of its Directors identifying their roles and functions and whether they are INEDs. INEDs are also identified as such in all corporate communications that disclose the names of the Bank’s Directors.
Further, the Bank has received from each of the INEDs an annual confirmation of his/her independence. The independence of the INEDs has been assessed in accordance with the guidelines set out in Rule 3.13 of the Listing Rules. Following such assessment, the Board has affirmed that all the INEDs continue to be independent.
The Bank issues appointment letters to each of the NEDs, setting out the terms and conditions of their appointment, including the time commitment expected of them. Additional time commitment is necessary if the NEDs also serve on committee(s) of the Board.
Board meetings shall be held at least once every quarter. Additional Board meetings, or meetings of a board committee established by the Board to consider specific matters, can be convened, when necessary.
Schedule for the regular Board/Board Committee meetings in each year are made available to all Directors/Board Committee members before the end of the preceding year. In addition, notice of meetings will be given to all Directors at least 14 days before each regular Board meeting.
Other than regular Board meetings, the Chairman also meets with NEDs, including INEDs, without the presence of the Executive Directors, to facilitate an open and frank discussion among the NEDs on issues relating to the Bank.
Meeting agendas for regular Board meetings are set after consultation with the Chairman and the Chief Executive. All Directors are given an opportunity to include matters in the agenda. Regular reports include the Bank's financial performance, strategic plan, annual operating plan and capital plan, risk appetite statement and profile, review of internal control and risk management framework, results of stress testings, as well as reports on large credit exposures and connected lendings.
Directors make their best efforts to contribute to the formulation of strategy, policies and decision-making by attending the Board meetings in person or via telephone or video conference facilities.
Minutes of Board/board committee meetings with details of the matters discussed by the Board/board committees and decisions made, including any concerns or views of the Directors/board committee members, are kept by the Company Secretary and are open for inspection by Directors/board committee members. Chairmen of board committees report on important issues discussed and reviewed by the committees, at each Board meeting.
During 2013, the Board held six meetings and the important matters discussed at Board meetings included :
In addition to the regular financial performance reports submitted to the Board at its regular meetings, the Board also receives financial and business updates with information on the Bank’s latest financial performance and material variance from the Bank’s annual operating plan during those months where no Board meetings will be held. Directors can therefore have a balanced and understandable assessment of the Bank’s performance, position and prospects throughout the year.
The Board reviews and evaluates its work process and effectiveness annually, with a view to identifying areas for improvement and further enhancement. The Board also regularly reviews the time commitment required from NEDs.
All Directors have access to the Executive Directors as and when they consider necessary. They also have access to the Company Secretary who is responsible for ensuring that the Board procedures, and related rules and regulations, are followed.
Under the Articles of Association of the Bank, a Director shall not vote or be counted in the quorum in respect of any contract, arrangement, transaction or other proposal in which he/she or his/her associate(s), is/are materially interested.
In July 2013, the Board adopted a Policy on Conflicts of Interest. The Policy identifies the relationships, services, activities or transactions in respect of which conflicts of interest may arise and sets out measures for prevention or management of these conflicts. The Policy also contains an objective compliance process for implementing the Policy which includes notification by a Director of conflicts or potential conflicts, and a review/approval process.
The Bank uses a formal, considered and transparent procedure for the appointment of new Directors. Before a prospective Director’s name is formally proposed, opinions of the existing Directors (including the INEDs) will be solicited. The proposed appointment will first be reviewed by the Nomination Committee, taking into account the balance of skills, and knowledge and experience on the Board. Upon recommendation of the Nomination Committee, the proposed appointment will then be reviewed and, if thought fit, approved by the Board after due deliberation. In accordance with the requirement under the Banking Ordinance, approval from HKMA will also be obtained. All new Directors are subject to election by shareholders of the Bank at the next Annual General Meeting (“AGM”) after their appointments have become effective.
According to the policy on the term of appointment of NEDs, term of appointment of each NED is three years except that where a NED has served on the Board for more than nine years, then his/her term of appointment is one year. In renewing the term of appointment of each NED, the Board reviews whether such NED remains qualified for his/her position.
The Bank’s Articles of Association provide that any Director elected or re-elected by the Bank shall be elected for a term which is no longer than the period expiring at the conclusion of the AGM of the Bank held in the third year following the year of his/her election or re-election and, for the avoidance of doubt, on expiry of his/her term he/she shall be deemed a retiring Director and eligible for re-election.
All Directors have full and timely access to all relevant information about the Bank so that they can discharge their duties and responsibilities as Directors. In particular, through regular Board meetings and receipt of financial and business updates, all Directors are kept abreast of the conduct, business activities and development, as well as regulatory updates applicable to the Bank.
There are established procedures for Directors to seek independent professional advice on matters relating to the Bank where appropriate. All costs associated with obtaining such advice will be borne by the Bank. In addition, each Director has separate and independent access to the Bank’s Management.
The Bank has adopted a Code for Securities Transactions by Directors on terms no less exacting than the required standards as set out in the Model Code for Securities Transactions by Directors of Listed Issuers (as set out in Appendix 10 to the Listing Rules). Specific enquiries have been made with all Directors who have confirmed that they have complied with the Bank’s Code for Securities Transactions by Directors throughout the year of 2013.
Directors’ interests in securities of the Bank and HSBC Holdings plc as at 31 December 2013 have been disclosed in the Report of the Directors as set out in the 2013 Annual Report.
Appropriate Directors’ liability insurance cover has also been arranged to indemnify the Directors for liabilities arising out of corporate activities. The coverage and the sum insured under the policy are reviewed annually. Further, the Bank’s Articles of Association provide that Directors are entitled to be indemnified out of the Bank’s assets against claim from third parties in respect of certain liabilities.
Induction programmes on the following key areas are arranged for newly appointed Directors so that they can discharge their responsibilities to the Bank properly and effectively:
Further, all Directors are provided with briefings and trainings on an on-going basis as necessary to ensure that they have a proper understanding of the Bank’s operations and business and are fully aware of their responsibilities under the applicable laws, rules and regulations, including but not limited to the Listing Rules, Companies Ordinance, Securities and Futures Ordinance and HKMA’s SPMs. Such briefings and trainings are provided at the Bank’s expenses. The Bank also maintains proper records of the trainings provided to and received by its Directors.
During 2013, all Directors received briefings or trainings in relation to the following topics :