Telling tales

Written by Cliff on Thursday 24 April 2014 at 12:55 pm

The recent implementation of Dodd Frank-like whistle-blowing proposals in the US and UK and other Asian countries has brought the act of reporting your own company’s misconduct into fashion. However, Hong Kong resists the change, citing that no thought has gone into that direction.

there are myriad, colourful names for Chinese people who betray their families

After all, the Chinese population is not too accustomed to laying bare their family’s problems, as is Confucian custom. To do so and gain rewards is betrayal and there are myriad, colourful names for Chinese people who betray their families, their state and their organisations since the age of fire.

However, Hong Kong sits uncomfortably at the seams between traditional Chinese custom and western management practice. The government and regulatory authorities have, since their establishment, been balancing the gut instinct of Chinese people and the need to gain some sort of respect and compatibility with Western corporate governance practices.

So what happens if a director, vested with fiduciary duties towards his company, wanted to report the misconduct of either the company or his fellow directors to a regulatory authority, e.g. the ICAC or the SFC? It is a vexing question indeed. Is it a breach of fiduciary duty? A breach of confidence? Misuse of proprietary information? Can he be fired? Can he be sued? What will become of his reputation?

Hong Kong has no general ‘whistleblower’ protection law to speak of. People open their mouths at their own risk. There are anonymous reporting programs operated by the ICAC and less formally provided by the SFC but that’s about it. Courts around the world have generally come to the conclusion that reporting would be in the best interests of the company because to delay may land even harsher penalties when any misconduct is discovered by the authorities, so that might help with the breach of fiduciary duties part.

All in all, a director might find it useful to resign before opening his mouth. Better quit first before being made to do so!

The above is for leisure reading only.

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