Hang Seng Infograph - English

An AnAlysis of independent non-executive

directors At HAng seng index compAnies

R501048 - rr-0010 - Hang Seng Board Index v32.indd 1 16/01/2015 12:03:08

21. Market Capitalization as of 9/30/20142. MTR Corp is 76% owned by Hong Kong Government

HK & cHinese poes (24)Total market capitalization

USD 582 Billion1

cHinese soes (22) Total market capitalization

USD 1.6 Trillion1

Global & Regional Companies – Not held by PRC government-controlled entities and deriving more than 50% of revenue outside Greater China

Chinese SOEs – Companies where PRC government-controlled entities have controlling interest and deriving more than 50% of revenue within Greater China

HK & Chinese POEs - Companies not held by PRC government-controlled entities and deriving more than 50% of revenue within Greater China

globAl & regionAl

compAnies (4)Total market capitalization

USD 326 Billion1

metHodology � Russell Reynolds Associates undertook an analysis of the Boards of Directors for all the companies that comprise Hang Seng Index.

� The study analyzed: – The structure and composition of each Board – The connectivity between Boards – The background and experience of the 232 independent non-executive directors (INEDs)

sitting on these Boards � In total, we analyzed the boards of 50 companies. Companies were grouped based on their ownership structures and market emphasis into one of three categories: Chinese State-Owned Enterprise (Chinese SOEs), HK & Chinese Privately-Owned Enterprise (HK & Chinese POEs) and Global & Regional Companies.

A snApsHot of compAnies included in our AnAlysis

2


3

ineds And foreign directors As A sHAre of All of boArd members

AverAge number of ineds on tHe boArd

560Directors

of whom...

232 (41%) are INEDs of whom...

87 (16%) are Foreign Directors

bAsic boArd composition � There are 560 directors across Hang Seng Index companies, 41% of whom are INEDs

� Board size across all company categories varies between 7 and 22 members, with an average size between 12-13.

� Average number of INEDs on boards varies depending on company type, from less than 5 for Chinese SOEs to 6.5 for Global & Regional Companies.

Global & ReGional Companies

6.5

4.8

Chinese soes

6.0

hK & Chinese poes

AverAge boArd size


12.5

12.5

Chinese soes

13.5

hK & Chinese poes

The smallest board has 7 members The fewest INEDs on the board: 3The largest board has 22 members The most INEDs on the board: 12

Min Average Max

ineds As A sHAre of All boArd members, by compAny type


hK & Chinese poes

Chinese soes 38%

75%

92%

70%

29%

24%

27%

53%

45%

* Data as of 9/30/2014


4

Age distribution of ineds hanG senG index s&p 1500

ined Tenure

tenure of ineds by compAny type

6% 4%

38% 32%

23%29%

32% 35%50 to 5950 to 59

Below 50 Below 5067+ 67+

60 to 6760 to 67

30%

23%

Appointed within last 4 years

Appointed in last 4 to 8 years

47%

Appointed over 8 years ago

ineds demogrApHics � Age distribution of INEDs for Hang Seng listed companies is similar to that for S&P 1500 Index companies, with roughly one third of them over 67 years old.

� 35 companies have INEDs with tenure over 8 years, across all company types.

� In terms of INED tenure, almost half of them were appointed over 8 years ago.

Note: typical INED term is four years, so INEDs with tenure of over eight years would normally be serving their third term on the board.

Tenure below 6 years Tenure between 6-8 years Tenure above 8 years

GLOBAL & REGIONAL COMPANIES

HK & CHINESE POEs CHINESE SOEs

65%

27%

8%

37%

50%

13%65%

27%

8%

* Data as of 9/30/2014


5

ined gender diversity � 28 boards do not have women INEDs on them. For comparison, since June 2014 all FTSE100 companies have at least one woman on their boards.

� The share of women INEDs differs by company type. Women make up about 19% of all board members at Global or Regional companies, but one-tenth of boards at HK and Chinese POEs and Chinese SOEs.

� Almost 11% of the INEDs are women. This is lower than at other major exchanges. For comparison, women directors constitute 21% of all directors for the ASX 50 and 15% for the S&P 1500.

gender diversity by compAny cAtegory

gender diversity Across countrieshanG senG index – ineds

hanG senG index – all diReCtoRs

asx 50** s&p 1500**

89%

11%

90%

10%

79%

21%

85%

15%

Global & ReGional Companies hK & Chinese poes Chinese soes

Min Average Max

3%

Women ineds As A sHAre of All boArd members, by compAny cAtegory


hK & Chinese poes

Chinese soes

38%

20%

13%

0%

0%

0%

11%

5%

Global or Regional Companies have women on their boards

2 4out of (50%) 12 24 (50%)

out of (36%)8 22out

of

HK & Chinese POEs have women on their boards

Chinese SOEs have women on their boards

* Data as of 9/30/2014** includes all directors


6

96.49 mm

ContinentalEuropean

British

NorthAmerican

SoutheastAsian & Japanese

Australian& New Zealand

44%6%

25%

19%

6%

ined nAtionAlity � 39 Hang Seng Index companies have foreign INEDs on their boards, including all global or regional companies.

� Average share of foreign INEDs varies by company type, from a third in Global & Regional Companies to one in ten for Chinese SOEs.

� Most foreign INEDs come from Britain or North America.

foreign ineds by compAny cAtegory

foreign ineds As A sHAre of All boArd members, by compAny type


hK & Chinese poes

Chinese soes

Min Average Max

10%

69%

46%

40%

7%

0%

0%

34%

18%

Global & ReGional Companies hK & Chinese poes Chinese soes

All Global or Regional Companies have foreign INEDs on their boards

HK & Chinese POEs have foreign INEDs on their boards

Chinese SOEs have foreign INEDs on their boards

4 4out of (100%) 20 24 (83%)

out of (68%)15 22out

of

nAtionAlity of foreign ineds

* Data as of 9/30/2014


7

ined bAcKground And experience � Chinese and foreign INEDs often bring diverse background and experience to the board.

� Experience in government or with regulators is common for both Chinese and foreign INEDs, with almost a third of Chinese INEDs bringing experience of working with the Chinese government or regulators, while for foreign INEDs this experience usually has an international focus.

� Banking or investment experience is common for both Chinese and non-Chinese INEDs, with almost half of each group having worked for a bank or investment firm at some point in their career.

� A finance or accounting background is slightly more common among foreign INEDs, while legal experience is more common among Chinese INEDs.

Yes

No

Yes

No

Yes

No

Yes

No

Yes

No

Yes

No

finAnce or Accounting experienceChinese ineds FoReiGn ineds

14% 23%

77%86%

greAter cHinA government or regulAtor experience**

FoReiGn ineds

32%3%

97%68%

non-greAter cHinA government or regulAtor experienceChinese ineds FoReiGn ineds

1% 15%

85%99%

bAnKing or investment experienceChinese ineds FoReiGn ineds

41% 46%

54%59%

AcAdemic experienceChinese ineds FoReiGn ineds

14%6%

86% 94%

legAl experienceChinese ineds FoReiGn ineds

11% 2%

89% 98%

* Data as of 9/30/2014** Note: CPPCC membership not counted in sample

Chinese ineds


8

boArd connectivity � The graph below illustrates how Hang Seng companies are connected through INEDs, NEDs and Executive Directors sitting on their boards.

� There are 32 INEDs sitting on multiple Hang Seng boards, and 36 companies share at least one INED with another Hang Seng Index company.

� Two key observations about board interconnectivity: – All but one Global & Regional Company share a director with Hong Kong & Chinese POE

Boards, but no Global & Regional Company share a director with a Chinese SOE. – There are 5 HK & Chinese POEs, 3 Chinese SOEs and 1 Global & Regional Company with no

links to any other Hang Seng Index company board.

HAng seng index compAnies – boArd connections

Global and Regional Companies

HK & Chinese POEs

Chinese SOEs

Board Interconnectivity

Key

Size of bubble indicates board size, e.g:

Color of bubble indicates type of company, i.e.:

21 8AIACheungKong

GalaxyEnter-

tainment

Bank OfChina

CiticPacific

Tingyi

KunlunEnergy

SinoLand

HangLung

Properties

HendersonLand

Develop-ment

Bank OfCommun-Ications

ChinaMengniu

Dairy

BoCHK

China LifeInsurance

ChinaMerchants

HenganInternational

Petrochina

ChinaShenhuaEnergy China

OverseasLand &Invest-ments

CoscoPacific

NewWorld

Develop-ment

Bank OfEast Asia Hong

Kong &ChinaGas

Li &Fung

SunHung KaiProperties

SwirePacific

Hong KongExchanges& Clearing

CathayPacificAirways Power

AssetsHangSengBank

AIA

HutchisonWhampoa

CheungKong

Ping AnInsurance

ChinaConstruction

Bank

ChinaUnicom

CLPWharf

BelleInternational

Tencent

SandsChina

LenovoGroup

CNOOC

Sinopec

ChinaResources

Land

MTRCorporation

ChinaResources

Power

ChinaResourcesEnterprise

ChinaMobile

ICBC

WantWant

HSBC

* Data as of 9/30/2014


Russell Reynolds Associates is a global leader in assessment, recruitment and succession planning for chief executive officers, boards of directors and key roles within the C-suite. With 350 consultants in 44 offices around the world, we work closely with both public and private organizations across all industries and regions. We help our clients build boards and executive teams that can meet the challenges and opportunities presented by the digital, economic, environmental and political trends that are reshaping the global business environment.

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Hang Seng Infograph - English