ICBC was named Overall Winner at the "Hong Kong Corporate Governance Excellence Awards 2010" held on Dec 2 in recognition of its excellence and exemplary standards of corporate governance. This makes ICBC the first listed bank honored since there was no "Overall Winner" for two years, but also demonstrates ICBC's high standard of corporate governance among the listed companies in Hong Kong.
Now in its fourth year, the Hong Kong Corporate Governance Excellence Awards are conferred annually since 2007 by the Chamber of Hong Kong Listed Companies. They continue to be the most influential, most significant awards on corporate governance in Hong Kong.
Companies were invited to participate in three categories: Hang Seng Index Constituents Companies, Hang Seng Composite Index Constituents Companies, Other Main Board and GEM Board companies. Three companies were chosen from each category as category winners. An overall winner may be selected from winners of these three categories.
(No Overall Winner in 2008, 2009). This year, besides to present ICBC the Award in the Category of Hang Seng Index Constituents Companies, judging panel unanimously agreed to honor ICBC as "Overall Winner" after having two years of no winners for the award. The "Overall Winner" Award to ICBC shows the high recognition from all on ICBC's corporate governance.
Good corporate governance is crucial to the stable operation of the banking industry and the whole financial system, also a key factor in judging how fast and how far can a bank go, said an executive with the ICBC. For the past few years ICBC has developed a high standard of corporate governance and internal control to face the new challenging time of uncertainties and risks, sharpen its competitive edge, maintain stable asset quality and sustain its profitability growth.
In the end ICBC has achieved historic progress and become the world's largest listed bank in terms of market capitalization, profitability and customer deposits.
Incessant Efforts on Good Corporate Governance Practices
Since restructuring and going public, ICBC in view of the actual situation has drew successful governance experience from international financial firms to build a robust corporate governance framework in compliance with the local laws, regulations and regulatory rules. The framework consists of shareholders' meeting, Board of Directors, Board of Supervisors and senior management. ICBC takes steps to improve corporate governance and develop a strong culture to put in place the proper and effective management system.
An important agenda of ICBC's corporate governance is to implement various initiatives on the set up of Board of Directors and committees under the Board. In selecting suitable persons for appointment as Board members, their personality, professional skills, sense of responsibility and independence are the factors taken into consideration, with emphasis on their knowledge structure and practical experiences that are complementary to each other.
Executive directors of ICBC have years of experience in running and managing a bank, while independent directors and non-executive directors have rich experiences in financial and economic affairs. The bank is also actively looking for ways in providing systematic training for the directors to enhance their duty-performance ability.
The Board structure having more than one-third members as independent directors is beneficial to protect the interests of minority investors. There are six committees under the Board of Directors. In most of the committees, over half of the members are independent directors who also assume the role of chairman of the committee.
ICBC sets up a working group system to assist the committees in their daily schedule, and facilitate their communications with ICBC senior management and related departments.
Further, ICBC adopts good corporate governance practices between Board of Directors, Supervisory Board and senior management for sound business decisions, good performance, effective monitoring and stable operation. In recent years, the Bank has revised fundamental guidelines on corporate governance covering the articles of association and authorization scheme.
As required by the supervisory authority, ICBC is the first among listed companies in China to establish written corporate governance policy, including administrative measures on the holding and amendment of ICBC Shares by the Board directors, Supervisory Board members and senior management staff, rules on the recommendation and nomination of candidates as Board members.
ICBC Board of Directors is tasked with the responsibility of making strategic decision and supervising the Bank's business. Supervisory Board is in charge of key supervisory monitoring on the Bank's accounting, risk management, internal control, the performance of Board directors and senior management staff.
ICBC senior management executes Board's decisions and strategies on reform and development.
Strong Internal Control and Risk Management
Risk management, internal audit and internal control are essential management mechanism in a robust corporate governance framework. Members in the ICBC risk management team are Board of Directors and its committees, senior management and its committees, Risk Management Department and Internal Audits Departments.
To the full extent, the highly effective internal monitoring, risk management and internal/external audit procedures help ICBC reduce risk, fraud, corruption and other malpractices to minimum, it also enables ICBC to achieve stable asset quality and exercise control on different risks.
Through revising the comprehensive risk management framework, ICBC incorporates different risks into the framework, namely, country risk, concentration risk, asset securitization risk, liquidity risk, bank account risk, reputation risk and strategy risk. Every year, management plan is drawn up for setting annual risk limit in order to fully make use of the limit to control risk.
ICBC dynamically evaluates the management of risks in all domestic branches, and streamlines risk reporting by the overseas branches and affiliates. As a result, the comprehensive risk management in the Group has been improved. In the past one year, ICBC moved in high gear in the implementation of Basel New Capital Accord, and the set up of projects concerning Internal Rating-Based Approach (credit risk), Internal Model Approach (market risk) and Advanced Measurement Approach (operational risk) and Internal Capital Adequacy Assessment Programs,.
ICBC is the first bank in the country to apply credit stress testing system into the risk management process.
Emphasis on Maintaining Shareholders' Interest and Fulfilling Social Responsibility
The protection and enhancement of the rights and interests of all shareholders, especially for minority shareholders, is a duty that a listed company should duly perform, and a fundamental corporate governance principle as well. ICBC has therefore established practical guidelines in line with the regulatory rules and corporate governance principles to ensure that its information disclosure is proactive, transparent and delivered in a way easily accessible by the shareholders.
ICBC discloses timely and accurately the information of major importance across a variety of channels and options. Performance result announcement, road-show, investor relation website, investor hotline and mailbox are some measures to stay close to the investors, collect their opinions on ICBC's performance, major issues and business development and reply questions from minority shareholders.
Besides, ICBC is the first bank in the industry to disclose the annual self-assessment report on internal control and the opinions from auditors. ICBC also takes the initiative to disclose its social responsibility report every year.
ICBC shows a strong appreciation of the need to protect the rights of shareholders, especially for minority shareholders to join the decision-making process, by having more than one-third of Board members as independent directors, a structure which is beneficial to protect the interests of minority shareholders.
To ensure equitable treatment for minority shareholders of A share and H share, ICBC remains a policy to open Annual Shareholders' Meeting concurrently in Beijing and Hong Kong since going public. Online voting was included beginning from last year, offering greater convenience for minority shareholders to participate in the Shareholders' General Meeting.
In order to allow shareholders holding ICBC shares 1% or above, independently or in total, to nominate independent directors, a rule for nomination of directors and supervisory board members under the cumulative voting system is stated in the Shareholders' General Meeting. All these measures effectively ensure all shareholders, especially the minority investors, have equal rights to vote for decision, express their opinions and ask for explanations.
ICBC also takes steps to manage the related-party transactions. Rigorous procedures are set up in the approval, statistics, reporting and disclosure of related-party transactions. Compliance checking is carried out to oversee the execution, and to the greatest extent possible, avoid any activity that undermines the interests of the ICBC and minority shareholders.
More important, in a bid to create sustainable investment return to shareholders and ensure the rights of all shareholders to receive income, while focusing on the business performance ICBC remains a policy to take out 45%-60% of its net profit every year and distribute it to the shareholders as the cash dividend.
Moreover, ICBC builds a 6-dimension social responsibility system based on three aspects of economic performance, environmental performance, social performance and presents in six themes of value bank, green bank, caring bank, harmonious bank, trust bank and brand bank.
Good corporate governance needs tireless effort to build, as related by the executive with ICBC. To this end, ICBC will continue the effort in assessing corporate governance practices and performance of the Board directors, Supervisory Board members and senior management staff. The aim is to improve ICBC corporate governance system and move further in setting up the corporate governance for the group in line with ICBC strategy of integrated operation and international expansion.
