The Companies Ordinance in Hong Kong does not have any provision to require shareholder approval for termination payments or ‘golden handshakes’ to senior executives of companies. Neither are there provisions for ‘Say on Pay’, which allows for annual binding shareholder votes on executive compensation; or for a ‘Name and Shame Register’ of companies whose ‘advisory votes’ by shareholders fall below a certain support level, as is practiced or proposed in some jurisdictions. Thus, this is a matter which determination is left exclusively to the board of directors.
This article reviews the background leading up to the departure of Mr Jay Walder, the then Chief Executive Officer of the MTR Corporation Limited in Hong Kong, and suggests that – by their collective action in approving the ‘contractual settlement’ of some US$2 million – its board of directors may have breached their duty to act in the best interests of the company and potentially exposed themselves to personal liability.
Professor CK Low
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