What CEOs really think - Hong Kong Institute of Certified Public

Plus:
Profile
CICPA President Feng Shuping
Capital markets
China stock market crash
Life
CPAs in love
Issue 1 / Volume 12 / January 2016
What CEOs
really think
Successful CFOs-turned-CEOs share the
importance of developing the people-oriented
right brain to moving up the leadership ladder
HK$70.00
President’s
message
aplus
“To be successful in today’s complex
business environment, company
boards need to be multi-skilled and
embrace true diversity.”
Dear members,
It is my honour and privilege to be
elected as the Institute President
this year, especially as the second
woman to hold this position. I hope
this helps reinforce the profession’s
efforts in supporting women in the
workplace. Indeed, the gender ratio
of our membership has already
reached 50:50, and the majority
of students are female. We understand, however, that more needs
to be done to help women reach
leadership positions in both the
profession and wider business. To
be successful in today’s complex
business environment, company
boards need to be multi-skilled and
embrace true diversity, taking into
account not only gender, but also
age, culture, skills, experience and
thinking style.
As I said to the media earlier,
the Institute has six major tasks
this year. Top of the list is our continuing advocacy for audit regulatory reform with a focus on three
areas: the need to clearly separate
sanctioning powers from those of
inspection and investigation within
the independent oversight body,
which should also have adequate
qualified audit professionals to
effectively perform regulatory
functions; the need to have sanctioning guidelines; and the operational costs of the oversight body
should come from investors. Before
the relevant bill will be submitted
to the Legislative Council in October, we will continue talking to the
government and urge for these reasonable changes.
Second, we will continue to look
into the review of the Professional
Accountants Ordinance. There have
been piecemeal revisions over the
years, but to make the legislation,
which has been enacted for more
than 40 years, more relevant in the
21st century and in line with local
and international best practices,
there is a need for a comprehensive
update. Consultations with members
and stakeholders will be conducted
as appropriate as this is an important
issue with far-reaching impact.
Third, we will continue to liaise
with the Ministry of Finance to
establish a mechanism for Hong
Kong regulators, including the
Institute, regarding access to audit
working papers. There has been
good progress over the overall
direction but since it involves a
number of Mainland parties, reaching a final agreement takes time.
Fourth, is to review the qualifying process for our next generation
of CPAs. To uphold the quality
of CPAs and maintain our global
recognition, we will improve our
Qualification Programme’s content and structure to make sure
our prospective members have the
skill sets that meet the demands of
employers and the global market,
as well as drive business growth
and sustainability.
Fifth, we will keep on enhancing our engagement and support to
members, whether they are in practice or in business, by offering more
practical training, thought leadership events, recreational activities,
as well as community services. All
of these aim to help them achieve
career success, work-life balance
and strive to be socially responsible.
Last but not least, we will continue to tailor-make services to
different membership sectors such
as our young members. The highly
successful mentorship programme
will begin the second matching this
year to help aspiring members learn
from their seniors in charting their
career paths. There will also be
other programmes supporting their
specific needs.
With these six tasks running
in full steam and other work to be
done under the Sixth Long Range
Plan, I look forward to another
vibrant year at the Institute. Of
course, your constant feedback is
important so do give your views
whenever we meet or via other
communication channels such as
our new Facebook page.
I look forward to meeting you
at the Institute events and taking
this opportunity, I wish you a
fantastic new beginning in the
New Year.
Ivy Cheung
President
January 2016 1
Contents
Issue 1 / Volume 12 / January 2016
26
Getting China’s
rollercoaster
under control
China’s stocks start the
year with big tumbles.
What's next?
01
NEWS
01 P
resident’s message
04 Institute news
06 A
ccounting news
10
FEATURES
10 F
rom CFO to CEO
Successful CEOs share their
career development paths
that went from CFO to the
company’s top position
17 Thought leadership:
Bernard Chan
The Chairman of the Hong Kong
Council of Social Service on the
need for companies to carry out
socially responsible objectives
18 Leadership:
Feng Shuping
President of the Chinese
Institute of CPAs discusses how
the profession can help China’s
internationalization
25 H
ow to…
Kriss Will on effective
workplace flexibility policies
26 G
etting China’s
rollercoaster under control
Mainland shares spiralled
downward at the beginning of
this year, alarming the world.
What’s next for China’s stock
market?
32 Success ingredient:
Ma Chan-chi
Deputy Chief Executive and
CFO at China Construction
Bank (Asia) shares how he went
from bookkeeping to facing
rapid changes in banking
38 G
reater growth
CPAs harness their romantic
relationships to encourage
mutual betterment
44
SOURCE
44 Benefits-in-kind capable of
converting into money are
taxable at the time of receipt
Employers are required to
report benefits received by an
employee that do not take the
form of money, and the process
can be complicated
46 The role of internal
auditors in enterprise risk
management
Amendments to the Corporate
Governance Code, effective
after 1 January 2016, can
create value for organizations
through internal auditing
49 T
echnical update
Provision of non-assurance
services to audit clients
50 T
echWatch 158
18
Leadership:
Feng Shuping
President of the Chinese
Institute of CPAs looks at
the accounting profession’s
growing influence in the
country’s economic
development
About our name
A PLUS stands for excellence,
a reference to our top-notch
accountant members who are success
ingredients in business and in society.
It is also the quality that we strive for in
this magazine — going an extra mile to
reach beyond Grade A.
President Ivy Cheung
Vice Presidents Mabel Chan, Eric Tong
Chief Executive and Registrar Raphael Ding
Email: ce@hkicpa.org.hk
Head of Corporate Communications Stella To
Editorial Advisory Group
Daniel Lin (Convenor), Eric Tong (Deputy Convenor),
Eugene Liu, Alec Tong, Edward Tsui, Yip Ka-ki,
Stanley Yuen, Raphael Ding, Chris Joy
Editorial Manager John So
Editorial Coordinator Maggie Tam
Office Address
37/F, Wu Chung House, 213 Queen’s Road East,
Wanchai, Hong Kong
Tel: (852) 2287-7228 Fax: (852) 2865-6603
52
Member and Student Services Counter
27/F, Wu Chung House, 213 Queen’s Road East,
Wanchai, Hong Kong
Email: www.hkicpa.org.hk
Website: hkicpa@hkicpa.org.hk
AFTER HOURS
52 B
ooks
Green Giants: How Smart
Companies Turn Sustainability
into Billion-Dollar Businesses
reviewed; Interview with author
E. Freya Williams
Acting Editor Gerry Ho
Email: gerry.ho@mandl.asia
Copy Editor Jemelyn Yadao
Contributors Tigger Chaturabul, Cathy Holcombe,
Robin Lynam, George W. Russell
Editorial Assistant Queenie Lee
Production Manager Jasmine Hu
54 L
ife and everything
Gemstones and hiking trails
as recommended by Institute
members
56 A
life in the day
Designer Trevor Cheng
Editorial Office
2/F, Wang Kee Building, 252 Hennessy Road,
Wanchai, Hong Kong
ADVERTISING ENQUIRIES
Nury Vittachi meets Florence
Kong, Finance Director of
10 Design
Book review
Advertising Director Derek Tsang
Email: derek.tsang@mandl.asia
Tel: (852) 2656-2676
A PLUS is the official magazine of the Hong Kong Institute of
Certified Public Accountants. The Institute retains copyright in
all material published in the magazine. No part of this magazine
may be reproduced without the permission of the Institute. The
views expressed in the magazine are not necessarily shared
by the Institute or the publisher. The Institute, the publisher
and authors accept no responsibilities for loss resulting from
any person acting, or refraining from acting, because of views
expressed or advertisements appearing in the magazine.
© Hong Kong Institute of Certified Public Accountants
January 2016. Print run: 7,050 copies
The digital version is distributed to all 39,729 members,
18,260 students of the Institute and 2,252 business
stakeholders every month.
Subscription: HK$760 for 12 issues per year.
See www.hkicpa.org.hk/aplus for details.
News
Institute news
Accounting news
Institute news
Institute elects new leadership
The Institute elected Ivy Cheung as
President for 2016, and Mabel Chan and
Eric Tong as Vice Presidents, at its 43rd
annual general meeting in December.
Cheung is a Partner of KPMG. Since
joining the Council four years ago, she has
served on many committees, including
as Chair of the Professional Conduct
Committee, which is fundamental to the
regulatory role of the Institute. Mabel
Chan is Founder of Mabel Chan & Co.
and Eric Tong is Audit Partner of Deloitte
Touche Tohmatsu China.
Seven members were elected to serve
on the Council for a term of two years.
Newly elected but returning members
to the Council are Mabel Chan, Jennifer
Cheung, Nelson Lam, Patrick Law,
Stephen Law and Kim Man Wong.
Another newly elected Council member
is Simon Wong. Elected members who
will hold office for one more year until
their two-year term ends are Raymond
Cheng, Ivy Cheung, Stella Cho, Dennis
Ho, Johnson Kong, Eric Tong and
Richard Tse.
For lay members, the government
reappointed Andrew Fung, Executive
Director and Head of Global Banking
and Markets of the Hang Seng Bank,
and appointed Andrew Mak, a barristerat-law who has been the Chairman
of the Special Committee for Greater
China Affairs of the Hong Kong Bar
Association, for a term of two years.
Two continuing governmentappointed lay members are Melissa
Brown, Partner of Daobridge Capital,
and a member of the Public Shareholders
Group established under the Securities
and Futures Commission and the Listing
Committee of the Hong Kong stock
exchange from 2006 to 2012, and Tam
Wing-pong, a veteran civil servant who
4 January 2016
Ivy Cheung (centre) together with Mabel Chan and Eric Tong at the AGM.
held the office of the Postmaster General
before his retirement. They carry on with
the second year of their terms.
The two ex-officio members are Ada
Chung, representative of the Financial
Secretary, and Martin Siu, Director of
Accounting Services.
The Council has co-opted Alec Tong
and Wendy Yung and they will hold office
until the end of the next AGM.
CPAs go green
at annual dinner
Nearly 630 members and guests came
together in December to enjoy an actionfilled annual dinner themed “CPAs
Go Green,” tying in with the Institute’s
ongoing commitment to corporate social
responsibility. Financial Secretary
John Tsang Chun-wah was the guest of
honour and International Federation of
Accountants Chief Executive Officer
Fayezul Choudhury was the special guest.
Entertainment was provided by the young
members’ band The Opinion and members
of the Dance Interest Group and Singing
Interest Group.
Obituaries
The Institute notes with regret the passing
of Ngan Man-kuen, Wong Mo-ching,
Suling, and Yeung Shiu-hung.
aplus
Disciplinary findings
Cheng Chi Pang, CPA (practising), and Leslie Cheng & Co.
Complaint: Failure or neglect to observe, maintain or
otherwise apply professional standards issued by the Institute.
Cheng was in breach of HKSA 220 Quality Control for an Audit
of Financial Statements and/or the Fundamental Principle of
Professional Competence and Due Care in paragraph 100.4 as
elaborated in paragraph 130.1 of the then applicable Code of
Ethics for Professional Accountants. Leslie Cheng & Co. was in
breach of a number of auditing standards.
Leslie Cheng & Co. audited the financial statements of a
Hong Kong listed company and its subsidiaries for the year ended 31 December 2009 and expressed an unmodified auditor's
opinion. Cheng was the senior partner of Leslie Cheng & Co. who
acted as the engagement quality control reviewer for the audit.
The Institute received a referral from the Financial
Reporting Council regarding non-compliance with the
professional standards pertaining to (i) recognition of
depreciation and financial statement disclosure of plant and
machinery; (ii) fair value measurements of shares issued as
consideration for two substantial acquisitions; and
(iii) determination of weighted average number of ordinary
shares for the purpose of calculating the loss per share. The
associated financial effects of the non-compliances were
considered material to the 2009 financial statements. After
considering the information available, the Institute lodged
complaints against the respondents under sections 34(1)(a)(vi)
of the Professional Accountants Ordinance.
Decision and reasons: The respondents were reprimanded.
The Disciplinary Committee further ordered Cheng and
Leslie Cheng & Co. to each pay penalties of HK$100,000 and
HK$200,000 respectively. In addition, Cheng was ordered to pay
the costs of the hearing totaling HK$10,250 and the respondents
were ordered to jointly pay the remaining costs and expenses of
disciplinary proceedings of the Institute and the FRC in the total
sum of HK$280,788.70.
Choi Man Chau, Michael, CPA (practising), Chan Kin Wai,
CPA (practising) and Pan China (HK) CPA Limited
Complaint: Failure or neglect by Choi and Pan China to observe,
maintain or otherwise apply HKSA 230 Audit Documentation
and 500 Audit Evidence and failure or neglect by Chan to
observe, maintain or otherwise apply HKSA 220 Quality Control
for an Audit of Financial Statements. Choi and Chan were
also in breach in the Fundamental Principle of Professional
Competence and Due Care in sections 100 and 130 of the Code
of Ethics for Professional Accountants.
Pan China audited the financial statements of a Hong Kong
listed company and its subsidiaries for the year ended 31
December 2010 and expressed an unmodified auditor's opinion.
Choi was an engagement director who signed the audit report
and Chan was the engagement quality control reviewer.
The Institute received a referral from the Financial Reporting
Council about non-compliance with professional standards
in the audit work carried out by Pan China on the valuation of
mining rights acquired by the company. After considering the
information available, the Institute lodged complaints under
sections 34(1)(a)(vi) of the Professional Accountants Ordinance.
Decision and reasons: The respondents were reprimanded.
The Disciplinary Committee further ordered Choi and Chan to
each pay a penalty of HK$12,000 and Pan China to pay a penalty
of HK$50,000. In addition, the respondents were ordered to pay
costs and expenses of disciplinary proceedings of the Institute
and the FRC totalling HK$83,215.60, to be shared equally
by them. When making its decision, the committee took into
consideration the particulars of the breaches committed in this
case, the respondents’ admission of the complaints and their
conduct throughout the proceedings.
Poon Ming Pui, CPA
Complaint: Conducting himself in a manner inconsistent with
the good reputation of the profession in breach of Statement
1.200 which applied up to June 2006, and failure or neglect to
observe, maintain or otherwise apply Fundamental Principle
of Integrity in sections 100 and 110 of the Code of Ethics for
Professional Accountants which applied from July 2006.
Poon was a licensed person under the Securities and Futures
Ordinance. From 2005 to 2011, he was employed in turn by two
securities companies. During this period, Poon made several
materially false or misleading declarations to his employers
in which he failed to disclose securities trading activities he
carried out through two of his friends’ securities accounts.
The Securities and Futures Commission subsequently took
disciplinary action against Poon, banning him from re-entering
the securities industry for 10 months from January 2014.
Poon reported the commission’s disciplinary decision to the
Institute during his annual membership renewal in December
2014. After considering the information available, the Institute
lodged complaints under sections 34(1)(a)(vi) of the Professional
Accountants Ordinance.
Decision and reasons: Poon was removed from the register
of certified public accountants for one year with effect from
18 January and ordered to pay to the Institute a penalty of
HK$10,000 and costs the disciplinary proceedings of HK$21,947.
When making its decision, the Disciplinary Committee took
into consideration the particulars in support of the complaint,
Poon’s personal circumstances, previous similar cases and his
submissions and conduct throughout the proceedings.
Details of the disciplinary findings are available at the Institute’s
website: www.hkicpa.org.hk.
January 2016 5
News
Accounting
“Apple pays every tax dollar we owe,”
said Apple’s Chief Executive Officer Tim
Cook, in an interview with American news
programme 60 Minutes, aired last month
on CBS News. When confronted with
the claims made by Congress against the
company’s accounting practices, Cook told
the interviewer it is “total political crap...
There’s no truth to it.”
The technology giant has been accused
of storing an estimated US$181.1 billion
in profits offshore, more than any other
company. The tax analysis group Citizens
for Tax Justice has calculated that Apple
would owe US$59.2 billion in United States
taxes if it didn’t hold these profits outside
the country. Two-thirds of Apple’s revenue comes
from overseas, Cook said. He added that
while he would “love to” repatriate it, he
can’t “because it would cost me 40 percent
[in taxes] to bring it home. And I don’t
think that’s a reasonable thing to do.”
Cook also criticized the American tax
code generally. “This is a tax code…that
was made for the industrial age, not the
digital age,” he said. “It’s backwards, it’s
awful for America.”
A 2013 Senate investigation found that
Apple has structured two Irish subsidiaries
to be tax residents of neither the U.S. nor
Ireland, where they are incorporated. This
arrangement ensures that they pay no tax to
any government.
Most of America’s largest corporations
maintain subsidiaries in offshore tax
havens. According to Citizens for Tax
Justice, at least 358 companies, nearly
72 percent of the Fortune 500, operated
subsidiaries in tax haven jurisdictions at
the end of 2014.
6 January 2016
Illustration by Harry Harrison
Apple CEO fights
back against tax
avoidance claims
aplus
Hong Kong IPOs to raise HK$280 billion
About 115 to 125 companies are expected to launch
initial public offerings in Hong Kong this year, raising
about HK$260 billion to HK$280 billion, Deloitte
Touche Tohmatsu told the Hong Kong Economic Journal last month. On the other hand, about 380 to 420
companies are likely to list on the Mainland, raising
¥230 billion to ¥260 billion, Deloitte Partner Edward
Au told the HKEJ. However, another potential interest
rate hike in the United States in March or April is
likely to affect investor sentiment in Hong Kong in the
first quarter, he said.
Japan state-backed fund to support
Toshiba’s restructuring
Japan's industry ministry and a government-affiliated investment fund will help Toshiba overhaul
its operations by facilitating tie-ups with Sharp
and others, the Nikkei reported last month. Toshiba
is looking to merge its white goods segment with
its counterpart at Sharp or another Japanese home
electronics manufacturer, the newspaper said. The
Innovation Network Corp. of Japan, overseen by the
ministry, and Toshiba are discussing the specifics
of an action plan to be set by March. Previously, the
company said it intends to ask for a new 300 billion
yen (US$2.49 billion) credit line by the end of this
month to fund the large-scale restructuring.
Grant Thornton probed over Globo audits
The Financial Reporting Council in the United Kingdom is investigating Grant Thorton over the firm’s
last two years’ audits of mobile technology company
Globo, which went into administration in November
last year after discovering financial irregularities
in the previous month. The firm said that it shall
“continue to work actively with the FRC” as they
await whether or not the outcome of their inquiries
will bring a formal case at a tribunal. Grant Thornton
was announced as the auditor of the Greece-based
company in March 2014, replacing BDO, which had
only been in place for a few months.
IMF chief warns of “disappointing” global growth this year
Global growth is set to disappoint in 2016 as a slowdown in China and higher interest rates
in the United States take a toll on the world economy, warned Christine Lagarde, Managing Director of the International Monetary Fund, the media reported last month. Writing
in German newspaper Handelsblatt, Lagarde said growth in global trade has slowed
considerably, while many countries still had weak financial sectors as the financial risks
increase in emerging markets. “All of that means global growth will be disappointing and
uneven in 2016,” Lagarde said, noting that mid-term prospects had also deteriorated due to
low productivity and aging populations dampening growth.
A world of numbers
31%
The increase in master’s degrees in
accounting awarded in the United
States for the 2013-2014 academic
year, according to the American
Institute of CPAs. Master’s degrees in
accounting earned that year totaled
27,359, up from 20,843 a year earlier.
In contrast, the number of bachelor’s
degrees in accounting fell by 11
percent to 54,423.
1,497
The number of credit cards owned
by Walter Cavanagh of Santa Clara,
California. Cavanagh has earned the
Guinness World Record title of “Mr.
Plastic Fantastic” by keeping the
most credit cards, amounting to a
US$1.7 million line of credit.
The average American only has
about two credit cards, but has more
than US$15,000 in credit card debt,
reported TIME earlier this month.
500
years
Approximately how old knotted
string records – known as khipus
– are. This month, archaeologists
discovered some khipus in the place
where they were used, the New York
Times reported, potentially helping
to fully understand the ancient Incan
accounting tools for the first time.
Khipus were kept by the Incas to
record the peanuts, chilli peppers,
beans, corn and other items that
went in and out of agricultural
storage houses.
January 2016 7
News
aplus
AFP
Accounting
Michael G. Oxley
AFP
Leonardo DiCaprio
Michael G. Oxley dies at 71
Former Ohio Congressman Michael G. Oxley, who helped write the
landmark anti-fraud legislation, the Sarbanes-Oxley Act, died on
1 January at age 71. Oxley passed away after suffering from nonsmall cell lung cancer, a type of lung cancer seen in non-smokers. He
led an effort to investigate failed energy giant Enron and helped create new accounting requirements in the 2002 Sarbanes-Oxley Act,
following a wave of corporate scandals that brought down major
corporations. The Ohio republican left Congress in 2007 after 25
years in the White House, where he devoted most of his time to
issues involving corporate oversight and insurance protection.
Singapore firms cautious about growth
A census of accounting firms in Singapore found that most
are cautious but remain positive about business growth ahead,
reported The Straits Times last month. Conducted by the Singapore Accountancy Commission, the census indicated that the
majority of the firms anticipate 1-5 percent in growth in the next
12 months. Despite the economic uncertainty, almost three in
four firms among the 265 polled are expecting growth in their
domestic revenue. Meanwhile, 28 percent of firms expect positive revenue growth from work performed outside the country
within the year.
PwC pushes further into lawyer’s turf
PwC has appointed a new head of projects, Damian McNair, in
an attempt to further boost its legal capability within Australia,
Accountants Daily reported last month. McNair will operate with
his three-strong team of lawyers in Melbourne. The firm’s legal
growth strategy, implemented over the past 18 months, is designed
to build a high-quality legal team of more than 100 lawyers, with
20 to 25 partners, Tony O’Malley, the firm’s Australia and Asia Pacific Legal Services Leader, told the publication. “We’ve probably
been the most aggressive to date in the Australian market, which is
a position we’re very happy to take,” he was quoted as saying.
Hollywood awards season kicks off with EY
EY oversaw the voting process for the Hollywood Foreign Press
Association’s Golden Globe Awards for the 43rd consecutive year
on 10 January at the Beverly Hilton Hotel, Beverly Hills. Three
senior EY professionals knew the results in advance and were
on the red carpet with handcuffed briefcases that contained the
names of this year’s Golden Globe winners. “The measures put in
place safeguard the accuracy of the results, maintain the integrity
of the process and protect the results until the very moment they
are announced from the stage,” EY Partner Andy Sale said in a
press release.
January 2016 9
Cover story
Corporate ladders
A CEO has to
balance different
perspectives, and
look at things from
a macro point of
view down to a
micro one
10 January 2016
aplus
FROM
CFO TO CEO
Top-notch analytical skills and a strong strategic mind-set are
well-known characteristics of a chief financial officer, which are
also important attributes for those who are looking to become
chief executive officer. Robin Lynam talks to some successful CFOturned-CEOs about their career development paths to find out what
more is needed to become the final decision-maker
Illustrations by Alex Nabaum
C
PAs do not become chief
financial officers by accident. Clearly to rise to the
top financial position in a successful company requires both ambition
and application – advanced business skills and rigorous discipline.
For an executive who has succeeded in climbing to that rung on
the corporate ladder, what would
he or she need to become the next
chief executive officer?
A look at the Korn Ferry
Institute analysis of sitting CEOs
in the Forbes Global 2000 in 2015
shows that not many CEOs have
a finance background: only 13
percent moved into that position
from being the CFO of the same
company, and only 18 percent
had held a senior level financial
officer’s position at any point in
their careers before assuming their
present roles. These numbers are
virtually the same overall for 2013
through 2015, and improve only
slightly among Forbes 500 CEOs.
So what are the secrets of those
who do succeed in rising to the top
after serving as CFOs? “The main
difference between being CFO and
going into the role of CEO is people
engagement,” says Antonio Manuel
G de Rosas, CEO of Pru Life U.K.,
a leading life insurance company
in the Philippines, and a member of
the Hong Kong Institute of CPAs.
“It’s really about the
ability to influence.
That is a skill you
must try to acquire.”
“As a CFO you are the head
of a large team but you are still
somewhat of ‘a doer’ to perform
the finance function. But when
you get to become CEO, while you
have to understand the business
very well and have the tools to
drive it, the main element is people
management.”
Before joining Pru Life as CFO
in 2007, de Rosas had served in
the same position for 10 years with
Nippon Life in the Philippines,
and before that for two years with
the Asia Commercial Bank [now
the Public Bank] in Hong Kong.
After spending 15 years as a CFO,
he says he had made a few adjustments when he was appointed
CEO in 2010.
“You train as an accountant and
you are very analytical. When you
become finance director you really
have to understand every aspect of
the business, but it’s very easy to
be caught up in numbers and the
technical aspects,” he says.
For a CEO, developing more
competencies in people-oriented
“right-brain” areas and not just his
or her technical left-brain skills is
crucial. “It’s all about your people.
You have to get the best team, and
as you progress in the role, you
have to learn not to micromanage.
That was the transition I had to
make from being CFO to CEO,”
de Rosas says. “If you are a CFO in
line for a CEO’s position, you will
have already been identified as
January 2016 11
Cover story
Corporate ladders
very technically competent to run
the business. My advice would be
to develop people skills. It’s really
about the ability to influence. That
is a skill you must try to acquire.”
A new perspective
In 2014, when Institute member
Tommy Kwok Yuen-keung became
CEO of Casablanca Group – a
leading supplier of branded bedding products to the Greater China
region – he brought with him
experience in a number of different
business sectors.
He had served for three years
as a CFO before establishing his
own consultancy business, and
was a consultant to the Casablanca
Group on corporate restructuring,
business development and financial modelling before being invited
to join them as CEO.
“I had exposure from my early
career to manufacturing, then infrastructure, corporate finance, IT and
real estate, so the majority of industries, except for this one – a CEO
role that is more to do with retail.
That’s kind of challenging, but it is
much smaller scale than what I have
handled in the past,” he says.
Kwok believes his financial
background equipped him with
many of the skills a CEO requires,
but says he worked hard to extend
his scope.
“When I was a CFO I had to
emphasize the finance perspective, but now I have to balance
12 January 2016
different perspectives, and look at
things from a macro point of view
down to micro. One thing that
made me different from a normal
CFO is that I have training in
Blue Ocean Strategy [a theory of
business building based on alternatives to traditional marketplace
competition]. I can put myself in
different positions and see things
in different perspectives,” he says.
“This role is more challenging, but
I find it interesting.”
A visionary
Institute member and CEO China
for the Publicis Groupe, Eric
Cheung, had been CFO China
for JCDecaux for two and a half
years before joining his present
employer in 2009, originally as
managing director.
“I don’t believe the
ways of thinking are
very different for a
CFO and a CEO. The
ways in which you
resolve issues are
quite similar.”
“After three years I was promoted to CEO, so for me the route
was through different companies,”
he says. “What I do here is very
different from what I used to do
when I was a CFO. I don’t have a
background in procurement, or in
human resources or law, and now I
have a legal director, an IT director,
and an HR director reporting to me.
So in order to adjust to this new role
I had to learn very fast.”
Although it is generally
agreed that successful organizations require close cooperation
between CEO and CFO, it is often
assumed that the two roles impose
essentially different perspectives
on the business. A CFO’s cost control priorities, for example, may
conflict with a CEO’s aggressive
business development plans.
Cheung, however, believes
that the roles have more common
ground than is sometimes supposed. “I don’t believe the ways
of thinking are very different for
a CFO and a CEO. The ways in
which you resolve issues are quite
similar. If a problem arises you
have to look at different scenarios
and options and do a pros and cons
analysis before you come up with a
solution,” he says.
He adds, however, that there
is a need to develop more detailed
knowledge and understanding of the
key functions within the company –
“sales, marketing, IT, legal and so
on, because as a CEO you will be
managing the senior people and you
have to understand what the other
functions are doing, and the key
issues that they have, and how you
can help resolve them.”
“Also, after being in this role for
aplus
For a CEO, developing
more competencies
in people-oriented
“right-brain” areas
and not just his or her
technical left-brain
skills is crucial
January 2016 13
Cover story
Corporate ladders
As well as being
the public face of
a company, the
CEO is its “voice,”
maintaining effective
communication
internally and
externally
14 January 2016
aplus
He initially found the exposure
to public scrutiny his new role
involved a challenge.
seven years [including the managing director phase] it seems to me
that a difference is that when you
are in the number one position in
the company you need to have a
more long-term view,” he says. “As
a CFO the mission was to deliver
that year’s profit targets, but when
you take up the CEO’s position
you have to consider longer-term
impacts. Of course, you have to
achieve the profit targets for the
year, but you also need to have a
vision for the next five or 10 years –
and a clear plan.”
Another essential quality for
a CEO, he stresses, is an ability
to communicate effectively, both
within the organization and with
a wider public, including other
stakeholders in the business.
“There are many opportunities for a
CEO to represent the organization,
so communication skills are very
important. Some CFOs may not be
very gifted in communication and
presentation skills, but they have to
improve them,” he says.
Being the voice
George Hongchoy, Institute member, joined Link Asset Management Limited as CFO in January
2009, and made the step up to CEO
in 2010. Link Asset Management
manages Link Reit – a publicly
listed real estate investment trust
that has extensive holdings in
retail and car parking space in
Hong Kong and China. He says
he initially found the exposure
to public scrutiny his new role
involved a challenge.
“One difficulty in particular
was becoming a diplomat and the
public face of Link overnight. The
role of CEO places me as the ‘voice’
of the company, which is a skill
that all new CEOs have to learn,”
he says. “Being the CEO of Link,
I have to lead and work with a far
bigger team. Our stakeholder base
is very broad, comprising investors,
shoppers, tenants, and the community at large. Maintaining effective
communication internally with staff
and externally with our stakeholders
is a priority in my role as CEO. On
the positive side, my transition to
CEO was easier as both offices are
demanding in terms of one’s ability
to prioritize, make sound decisions
and to think out of the box.”
“Read different types of books,”
suggests Hongchoy. “They do not
necessarily have to be related to
your job and career choice, but
rather they can help you be more
inspired in your work. Be inspiring
and motivating. Don’t be afraid
to make mistakes and create what
is needed to advance the business
mission. Learn from others. Study
real-life cases of business successes
and failures, not just companies in
your industry, but also those unrelated to your business.”
Preparing the mindset is also
important. “Successful business
management takes leadership,
which requires a broad inter-disciplinary perspective to set the right
goals for our teams and to inspire
colleagues to deliver them. A financial background readies one for the
daily business challenges by covering the different aspects of business
management, including business
strategy, corporate finance, the
legal environment, risk management and corporate governance, to
name a few,” adds Hongchoy.
As de Rosas at Pru Life points
out, the odds are not always against
CFOs looking to make that next
logical career step. “Business is
all about calculated risk, and one
of the advantages you have as an
accountant is that you know how
to measure risk. Other disciplines
may not have trained you to make
that calculation. It’s easier for
us to make a decision
on whether to pursue an
opportunity or not.”
January 2016 15
Thought leadership
aplus
Bernard Chan
The Chairman of the Hong Kong Council of
Social Service explains the strategic value of
corporate social responsibility
Beyond giving money
I
ssues arising from economic
and social developments – such
as globalization, inequality and
new media – are posing new challenges for the business world. Faced
with rising public expectations,
many companies are asking whether
the pursuit of immediate maximum
returns is a sustainable, viable and
responsible approach to business.
They are realizing that valuing their
employees, investing in the community and maintaining a positive
interactive relationship with the
wider world are important to their
long-term success. To bear social
responsibility is no longer simply a
public relations tactic; it is a necessary fundamental task.
A few years ago, the Hong
Kong Council of Social Service
conducted a survey of 1,000 Hong
Kong citizens chosen at random. Of
the respondents, 62 percent indicated they had heard of corporate
social responsibility. Meanwhile,
more than half said that, as consumers or job-hunters, they would
give consideration to whether or
not a company fulfils its social
responsibility. In the opinion of the
public, corporate social responsibility not only covers product safety
and customer protection but also
minimizing damage to the environment and caring for employees.
In Hong Kong, many companies have traditionally focused on
donating money as the main way
of honouring their commitment to
the community. Every year, corporations give billions of dollars in
charitable donations. This perhaps
reflects the attitudes of Hong Kong
people, who are well known for
their willingness to help others
by donating money – but perhaps
traditionally not so much for volunteering their time or lending a hand
to strangers.
People are used to the giving
culture, but they may not understand that corporate social responsibility is beyond giving money.
To make our community and the
world a better place, all of us need
to think about how to address social
issues, and this applies especially to
business leaders.
As Chair of the Hong Kong
Council for Social Service, I have
been proud to take part in launching
and developing the Caring Company
scheme. Started in 2002, it encourages and gives public recognition
to Hong Kong corporations that
achieve outstanding contributions in
caring for the community, employees or the environment. Several
thousand companies have now been
awarded the Caring Company logo
under the scheme, which also aims
to promote more strategic partnerships between the business and
social service sectors in order to
bridge the gap of social needs.
This year will see the introduction by Hong Kong Exchanges and
Clearing of the new environmental,
social and governance reporting
standards. This is in line with global
trends. It means that investors – and
the media and other stakeholders –
will have a clearer picture of how
seriously each listed company is
considering society’s needs in the
way it does business.
Professionals especially
accountants are well-placed to
contribute in this part with their
expertise and experience in driving
business success.
Meanwhile, even the basic
practices like making cash donations could, and should, come
under greater scrutiny. This should
encourage companies to ask more
questions. Are their donations,
employee-volunteer programmes
and other activities effective? How
are they helping? Do they actually
change anything?
Hopefully, this will encourage companies to re-examine their
whole corporate social responsibility
strategy. For example, they might
consider the type of social issues
they want to focus on – whether it
is poverty, education, environment,
or healthcare services. They could
then determine whether the activity
is in line with their company values,
direction, and particular industry.
Ultimately, companies should
come to see corporate social responsibility as part of the corporate
mission and long-term goals – to
increase shareholder value while
playing a positive role in improving
our society.
“Are their donations, employeevolunteer programmes and
other activities effective?
How are they helping?”
January 2016 17
Leadership profile
Feng Shuping
A YEAR OF
GOING
GLOBAL
As the Chinese Institute of Certified Public
Accountants continues to play an important
role in helping China become increasingly
internationalized, its President, Feng Shuping,
talks to A Plus about what that means for the
nation’s CPAs
Photography by Jayne Russell
I
f there is a word to sum up what
has been on the mind of the Chinese Institute of Certified Public
Accountants in recent years – and
particularly in 2015 – it is “internationalization.”
In response to China’s “going
out” strategy and the “One Belt, One
Road” initiative, the organization
is encouraging accounting firms
to join global networks, or develop
member firms overseas, in order to
raise their core competitiveness, and
increase their capacity to serve their
clients internationally.
“Last year, we launched some
activities that not only further consolidate the convergence of certified
public accountants’ practices with
international standards, but also
enhance their professional education, accounting firms’ internal
governance and modernization of
their professional service to match
the needs of the market,” says Feng
Shuping, President of the CICPA, in
an interview with A Plus.
Indeed, this concept of “going
global” has been one of the objectives under the five core development strategies launched in 2010
by the CICPA following its fifth
National Assembly of Delegates,
which asserted the focus of build18 January 2016
ing professional integrity and
internationalization as the guiding
principle for growth.
The five strategies include talent
development, promoting bigger and
more competitive accounting firms,
convergence of international standards, developing non-audit service,
and information technology system
construction.
As part of this, the CICPA has
been instrumental in securing
the policy support of the Chinese
government. In 2007, nine government departments under the State
Council, including the Ministry
of Commerce and the Ministry of
Finance, jointly issued “Opinions
on Supporting Accounting Firms
in Expanding Exports of Accounting Services”
followed by the State Council’s
issuance of MoF’s “Opinions on
Accelerating the Development of
China’s Accountancy Profession”
in 2009.
“Both documents showed
Beijing’s determination to execute
its national ‘going out’ strategy and
its full support for the accountancy
profession to facilitate it,” says Feng.
Currently, more than 70 Chinese
aplus
Feng had worked in the Ministry
of Finance since 1978, and had
been promoted to Director of
the Accounting Department and
Assistant Finance Minister
January 2016 19
Leadership profile
Feng Shuping
Feng is a member
of the Financial and
Economic Affairs
Committee of
the 12th National
People’s Congress
20 January 2016
aplus
firms provide various professional services to support the “going out” of Chinese
enterprises. These include 41 firms that offer
services to Chinese enterprises listed in the
United States and 11 firms that provide audit
services to H-share enterprises in Hong
Kong. In 2014, these firms recorded 7.64 billion yuan in revenue from their international
service, up by 18.74 percent from last year,
according to CICPA.
In addition, 72 Chinese accounting firms
have established 45 overseas branches,
member organizations and affiliated organizations by the end of 2014. Nine firms have
joined the top 10 international accounting
networks. Meanwhile, among those with
securities-related businesses, 18 have joined
17 international accounting networks.
“Some big home-grown firms have
moved from solely joining international
accounting networks to developing their
own brands and networks by setting up
overseas. Their influence in international
accounting networks has increased accordingly,” says Feng.
ShineWing, as an example of a Chinese
firm that has gained increased recognition in
the global market, became the first Chinabased accounting network to win the “Rising
Star Network” award organized by the International Accounting Bulletin in October last
year. According to IAB’s world survey 2014
and 2015, the firm ranked 19th among all the
global accounting networks with a revenue
of US$263.8 million, followed by Reanda
International, which ranked 22nd with
US$144.1 million in revenue.
Also, senior executives of the China
offices of BDO, Baker Tilly, Crowe Horwath
International and Grant Thornton now play
an important role in the decision-making
process within these international networks.
Forward-looking agenda
Despite the Chinese profession’s increased
influence and input, Feng believes there
is still much work to be done. The profession, she says, must reform and upgrade
its services to capture the new opportunities presented by China’s innovation and
development strategies as part of the 12th
Five-Year Plan.
“That includes the ‘One Belt, One Road’
infrastructure investment, reforming the
government accounting system, developing the financial market and implementing
the so-called Internet Plus action plan,”
says Feng. According to a government
work report issued at the National People’s
Congress in March last year, Internet Plus
action plan seeks to drive economic growth
by integration of Internet technologies with
manufacturing and business.
“[The 13th Five-Year
Plan] lays down the
CICPA’s blueprint
for development to
further expand the
importance of CPAs in
the country and reinforce
our profession’s
development and
direction.”
• Promoting the establishment of professional services market, studying the
market demand and enhancing business
development and innovation services to
enlarge market supply.
• Leveraging on the country’s new and
open economy to promote the profession’s
internationalization; enhancing firms’
internal governance to reach international
level through serving the Chinese economy and capital markets; helping firms
adopt international advanced concept,
standards and methods to render services;
and strengthening the profession’s influence on international matters.
• Applying Internet Plus and big data technology, as well as leveraging on information technology trends and prospects
to set up the next five-year plan on the
profession’s IT construction.
These highlighted areas will have an effect
on the CICPA’s more than 200,000 members
(as of June 2015), 100,601 of whom are practising CPAs. Together with other accounting
personnel in the profession, it brings the total
to more than 300,000. They provide profesThe country has now formulated
sional services to more than 4.2 million
its 13th Five-Year Plan, the first under
enterprises and public institutions, including
President Xi Jinping, which aims to realize more than 2,600 listed companies.
its 100-year goal of building a “moderOver the past few years, the growth rate
ately prosperous society.” According to a
of the profession has consistently surstatement issued after the meeting of the
passed its global counterparts, according
Political Bureau of the Communist Party
to the organization.
Central Committee, the plan also acknowlIn 2014, the profession accumulated 60.3
edges that “China is entering a ‘new norbillion yuan in revenues. One of the fastest
mal’ of economic development and facing
growing areas was consultancy, which saw
not only great strategic opportunities but
its proportion surge to 30 percent in the same
complicated and tough challenges.”
year, up from 16 percent in 2009.
“That lays down the CICPA’s blueprint
Similar to other firms worldwide with the
for development to further expand the impor- rapid expansion of their consulting busitance of CPAs in the country and reinforce
nesses, firms in China have been rapidly
our profession’s development and direction,” transitioning from doing traditional audit
says Feng.
work to offering clients non-audit services.
To cope with the new challenges and
“These include internal control design and
opportunities presented by China’s “new
appraisal, strategic management, merger and
normal” economy and the national “going
acquisition, due diligence, result assessment,
out” strategy, the CICPA aims to speed up its investment decision, accounting, trainintegration with the rest of the world, with a
ing and other areas that help corporations
focus on the following four areas:
enhance internal control, strategic planning,
• Enhancing accountants’ practice capabil- capital utilization, risk aversion and finanities, professionalism, professional ethics cial risks management,” says Feng.
She believes firms have to upgrade their
and level of professional judgment.
January 2016 21
Leadership profile
Feng Shuping
management models, strengthen internal
controls, quality controls and IT system,
as well as create their own culture and
brand in the process of helping clients
“going out.”
“Accounting firms should leverage
on this special opportunity brought by
the national ‘going out’ movement and
speed up their own processes to build an
international network,” says Feng.
“They have to develop overseas branch
offices, get familiar with international
market operations and international
standards, and enhance credibility in
international markets so as to provide
more thoughtful, efficient and professional services.”
Learning for life
To achieve such capabilities, it is important to invest in education, especially
lifelong learning, says Feng. After
more than 27 years of development, and
especially after implementing a talent
development strategy in 2005, she says
the CICPA has managed to build up a
lifelong learning system that provides
continuing education to its members
through long-distance (visual) training
courses, face-to-face training classes,
study classes and workshops.
Nowadays, through 31 local offices,
the CICPA achieves nearly 20,000 enrolments to its training programmes every
year, while the three national accounting
colleges reach more than 6,000 enrolments yearly.
Through different levels of continuing education initiated by local offices,
coupled with encouraging capable
member firms to set up their own internal
training, Feng believes that CICPA
members have been effectively trained up
to perform with the utmost integrity and
professionalism. “The institute itself sets
a good example of a continuing professional development system for lifelong
22 January 2016
learning,” she says.
In addition, the CICPA has been working closely with the education sector to
foster a new generation of quality professionals. Since 1994, it has been setting up
CPA professional courses in, and providing
guidance and sponsorship to universities
and colleges. Currently the CPA professional courses are operating in 19 universities and colleges with more than 6,000
students and more than 30,000 graduates.
“In order to speed up the internationalization process, we take the job of training
the next generation of accounting professional very seriously,” says Feng.
To foster fresh, international-compatible accounting talent, the organization
has sent a total of 841 top CPA graduates for overseas training in 10 batches
and trained up more than 280 teaching
personnel since 2005.
It regularly helps organize international
exchanges for the profession’s top management and young accounting professionals,
and also sponsored or subsidized members
to secure overseas qualifications. Up to
now, the CICPA has selected 350 leading
talents in 12 batches for further training
in order to foster a high-level of accounting talent with a global perspective and
enhanced strategic thinking.
While the road to internationalization may be long and winding, Feng is
confident that her organization is moving
towards the right direction.
This article is developed and translated with permission from an original
set of Chinese questions and answers
provided by the Chinese Institute of
Certified Public Accountants which is
available from the A Plus website
www.hkicpa.org.hk/aplus/2016/01/
index.php. If there are different interpretations between the English version and the Chinese version, the
Chinese version shall prevail.
aplus
“Accounting firms
should leverage on this
special opportunity
brought by the national
‘going out’ movement
and speed up their own
processes to build an
international network.”
January 2016 23
How to...
aplus
Kriss Will
The people management consultant and
Founder of Kriss Will Consulting explains how
bringing in flexibility schemes to the workplace
comes down to more than just policy
…introduce flexible
work arrangements
Many people would like some
flexibility in their work arrangements. Flexibility means different things to different people. It
is worth considering the Oxford
dictionary definitions when thinking about what flexibility means:
The quality of bending easily
without breaking. The ability to
be easily modified and willingness to change or compromise.
All these elements are necessary
when thinking about flexible work
arrangements. Businesses need
to think about what can be made
to work while still meeting client
needs. They also need to make it
easy for their people to discuss and
implement flexible work arrangement proposals, and leaders and
managers need to be willing to
change to accommodate changing
work arrangements.
Here are a few thoughts about
how to introduce sustainable flexible
working arrangements in your firm:
Starting at the top
Too often the fabulously worded
work flexibility policies are purely
aspirational. The reality is that
people know that to make it work,
it needs to start with the owners.
Many of these people work fulltime and full-on and see this as the
only option. I know a number of
business leaders who would like to
work less or differently and take a
commensurate income reduction
yet are fearful of what this might
mean for their stature in the eyes of
their colleagues. By encouraging
business leaders and managers to
identify their own ideal working
arrangements and working to incorporate these into profitable resourcing models, I believe businesses
will have happier and more motivated leaders while also providing
good role models for others.
A broad policy position
For some people flexibility means
being able to leave earlier one day
per week to participate in activities
of personal interest. For others it
will mean working less than fulltime so they can commit to carer
responsibilities. For some it will
mean working from different locations. And sometimes it is a combination of all of these. A policy
that tries to capture all the possible
combinations of flexible working
arrangements is not needed.
I have often argued that flexibility is a mindset, not a policy. I
think the ideal policy wording for
flexible work arrangements goes
something like this: “Come and
talk to us about your ideal working
arrangement and how together we
can make this work successfully for
you, for your team and for the business. We will listen. And we know
your ideal will change from time to
time – keep talking with us.”
Being open-minded is a good
beginning. Being practical and honest about how the arrangement will
operate is essential. Encouraging
managers to consider how these
arrangements could also benefit
them personally will go a long way
to making less than full-time/fullon arrangements normal rather than
“special.”
Clear understanding of
expectations
It is critical to ensure there is a
clear understanding about the
expectations the employee has of
the employer, and vice versa. This
understanding is reached through
discussions about how flexible
work arrangements will take place
in practice rather than assumptions. In my experience, the key
areas to address when someone
wishes to work less than full-time
include:
• What are working hours – what
does a full-time day equal in
terms of hours and pay and how
will work on non-working days
be compensated?
• Fee earning or work productivity expectations
• Salary structure – day rate or
hourly rate
• Ability to work extra if needed –
yes/no/maybe/notice required
• Availability to be contacted on
a non-working day – yes/no/
when/how
• Managing emails and incoming
calls on non-working days –
who or how
• Who is the back up in the team
for urgent matters on non-working days?
• Any provision of home office
equipment and payment for
working from home costs?
• If there is to be a trial period to
assess the success of a changed
working arrangement, parameters for measuring success or
otherwise, and what happens if
it does not work out
Starting with an open mindset
about possibilities rather than
obstacles to flexible working
arrangements will assist any business to attract and retain the high
performing staff who seek flexibility. And keep in mind, full-time
staff want flexibility too – make
sure your business supports this.
January 2016 25
Capital markets
China crash
Getting China’s
ROLLERCOASTER
under control
Mainland shares gyrated wildly as 2016
began, alarming investors and regulators.
However, as George W. Russell reports,
panic and policy risks should recede as
Beijing allows market forces to gradually
take the place of intervention
Illustrations by Kouzou Sakai
A
lmost as soon as the New
Year began, China’s stock
markets plunged, triggering “circuit breakers” that paused,
then halted, trading in Shanghai
and Shenzhen. The global reaction
was swift and startling. While last
summer’s collapse was blamed on
irrational individual investors and
ham-fisted intervention, the crash
of 2016, it seemed, had deeper
implications.
The big question was whether
the plunge was a symptom of
a general malaise in China’s
economy. Last December saw a
slew of disappointing data: the
producer-price index of wholesale
prices declined, while both the
Markit manufacturing and Caixin
services purchasing managers’
indices slid.
“Since the economic growth of
Mainland China is slowing down,
26 January 2016
it is no surprise that the market is
going down as well,” says Andrew
Lam, Director of Assurance at
BDO and a Hong Kong Institute of
CPAs member. “The Chinese stock
market, in addition to being pulled
down by domestic economic
issues, is also reflecting the downward spiral of other international
markets to a certain extent.”
“The macroeconomic factors
that prevailed at the end of last year
– including the United States interest rate rise, the sharp depreciation
of the renminbi and the decline
in the price of oil – have set the
stage for great market volatility,”
notes Paul Lau, Head of the Capital
Markets Advisory Group at KPMG
China and an Institute member.
While investors were generally
prepared for a rough ride across
global financial markets as 2016
began, the magnitude came as
aplus
January 2016 27
Capital markets
China crash
a shock. The S&P 500 market
valuation fell US$1.04 trillion in
the first two weeks of the year,
while Chinese investors unloaded
US$590 billion in a single day.
“What happened at the start of
2016 was probably beyond the
expectation of many investors,”
Lau says.
Moreover, the overall economic outlook, though far from
weak, is more guarded than in
previous years. (See Going global
– with both good news and bad
on page 29). “China is expected
to slow down further in 2016, as
a two-speed economy led by the
service sector is unable to offset
the weaknesses in the manufacturing sector,” says Ben Luk, Global
Market Strategist at JPMorgan
Asset Management.
Yet long-term business confidence remains upbeat. “China is
as healthy as ever,” Ronnie Chan,
Chairman of Hang Lung Group, a
major Hong Kong and Mainland
property developer, told the Foreign Correspondents’ Club on 14
January. “Even cyclical events can
become serious, but China isn’t
going down in a systemic way.”
Changing rules
One explanation for such confidence is that analysts draw a distinction between China’s capital
markets and the broader economic
performance. “We believe the
28 January 2016
collapse of the stock market had
very little to do with the actual
economy, but rather the increased
nervousness around policy measures,” says Luk at JPMorgan.
“Even cyclical
events can become
serious, but China
isn’t going down in
a systemic way.”
While regulators argue they
need to rein in volatility and
sustain valuations, arbitrariness
only adds to the uncertainty,
especially among inexperienced
retail shareholders. “I think many
market participants have started to
question the credibility of Chinese
policymakers as to whether they
can really manage the opening up
of China’s capital markets,” says
Lu Wenjie, H-share Strategist at
UBS Securities in Shanghai.
That was evident last year,
when retail investors – egged on
by officials who hoped investment would boost cash-strapped
companies – ploughed 4 trillion
yuan into stock markets through
margin trading (borrowing money
to buy shares). By the summer, the
bubble burst amid margin calls,
wiping out 30 trillion yuan. In
response, Beijing spent 1.5 trillion
yuan to support the stock market
and banned new share sales and
sell-offs by major shareholders.
The market continued to decline
until September.
As the year began, investors
were concerned that restrictions on
sales by large shareholders (those
with stakes of 5 percent or higher)
were due to be lifted on 8 January,
prompting a new wave of selling.
Instead, the China Securities
Regulatory Commission extended
the ban for another three months
and announced new share sales
curbs to prevent large shareholders
from selling more than 1 percent of
a company’s flotation every three
months.
In addition, CSRC launched a
“circuit breaker” to curb future
plunges. Under this mechanism, a
move of 5 percent in either direction from the benchmark CSI300
Index’s previous close would trigger a 30-minute trading suspension in the Shanghai and Shenzhen
stock exchanges. A 7 percent rise
or fall against the index would halt
trading for the rest of the day.
The circuit breaker was
deployed on 4, 5 and 6 January
as investors sought to sell before
it kicked in. On 7 January, when
trading on the Shanghai exchange
lasted only 29 minutes, the CSRC
pulled the plug on the circuit
breaker. “The 5 percent and 7
percent thresholds set down by the
Chinese authorities, for a tempo-
aplus
rary cooling-off period and a final
suspension of trading, proved to be
too narrow,” says Lam at BDO.
Gaining knowledge
From an international perspective, many of the rules governing
China’s stock markets appear to
be capricious and unpredictable.
“China’s government does not
trust the markets, and the markets
do not trust its government to set
policy and establish rules predictably and transparently,” asserts
Larry Elkin, President of Palisades
Hudson Financial Group, a U.S.
asset management company.
“The panic selling was sparked
by an apparently abrupt change in
policy, when China’s central bank
signalled a desire to see the yuan
fall more quickly,” adds Elkin,
also a member of the New York
State Society of CPAs. “It was
an echo of the turmoil that China
set off with the devaluation last
August.”
To be sure, even Mainland
observers acknowledge that stock
market management can appear
haphazard, but note that Chinese
investors can be an unusual type
of clientele. “Even the regulators
themselves are not experienced
to handle the sometimes-chaotic
response from retail investors in
China so [there is a] trial and error
process,” says Lu at UBS.
Some observers stress the need
Going global – with both good
news and bad
Not so long ago, bad news about China
was largely confined to China. But now
that the country is the second largest
economy in the world, trouble spreads
quickly, and widely.
“Plunges in Chinese equity prices
have caused major swings in markets
globally, and many have started to question the global outlook more generally,”
says Anders Svendsen, Chief Analyst at
Nordea Bank in Copenhagen.
Global markets are much more sensitive to China’s underlying fundamentals
than in the past. One stark example is
slowing economic growth – 6.9 percent in
2015, the slowest in 25 years. Another is
the collapse in global commodity prices,
which is attributed to the slowing pace of
Chinese gross domestic product.
The producer-price index, an index of
wholesale prices, stood at -5.9 percent
in December, according to the National
Bureau of Statistics – the 46th straight
month of negative PPI. Weak demand has
forced manufacturers to cut prices to
attract business.
China’s manufacturing sector continues to contract: December marked the
fifth successive month that factories
shed jobs, while the consumer price
index inflation rose 1.4 percent in the
last year, well below the government’s
full-year target of 3 percent. Analysts
say rising deflationary pressure will pose
a major risk in 2016.
Meanwhile, the yuan has lost 5
percent of its value since August 2015
and China’s foreign-exchange reserves
fell US$108 billion to US$3.3 trillion in
December 2015.
However, China’s balance of trade
remains a bright spot. Exports in December declined 1.4 percent year on year,
much better news than the 8 percent fall
expected by The Wall Street Journal’s survey of economists. And some analysts are
relatively sanguine on the outlook for consumption. “Higher domestic demand will
allow for a rebound in imports, progressively reducing the trade balance surplus,”
says Mahamoud Islam, Economist for Asia
at trade credit insurer Euler Hermes.
“GDP growth is set to remain resilient
in 2016 (6.5 percent) and 2017 (6.4
percent), as a result of gradual acceleration in domestic consumption supported
by public expenditure,” says Islam. His
projections are backed by consensus
forecasts on GDP growth.
While annual growth in the 6 percent
range is a slowdown for China’s economy
– and one that might be accompanied by
further yuan weakening and declining foreign exchange reserves – overall growth
remains robust by world standards. “A
crisis in China remains a low-probability
event,” Lim Say Boon, Chief Investment
Officer of DBS Bank in Singapore, noted in
an advisory on 11 January.
January 2016 29
Capital markets
China crash
30 January 2016
aplus
for more investor education. “In
the long run, I think if there are
some rules introduced to limit the
ability of major shareholders to sell,
it’s more on an educational basis,”
says Edward Au, Co-Leader of the
National Public Offering Group at
Deloitte China and an American
Institute of CPAs member.
“The goal is to
get the market to
stabilize and not be
subject to irrational
sell-offs.”
“Although China is the world’s
second-largest economy and the
China stock market is quite big,
it is immature relative to Hong
Kong,” Au adds, noting that
A-shares – those of Mainland
companies that are traded on the
Shanghai and Shenzhen stock
exchanges – were created only
about 25 years ago. “Retail investors’ thinking is more short-term,
more speculative, more aggressive. The goal is to get the market
to stabilize and not be subject to
irrational sell-offs.”
Au suggests that shareholders
should be encouraged to better
understand the consequences
of selling shares and the market
should know their motivation.
“There really needs to be more
education regarding why retail
investors sell, whether they are
lacking confidence in the market
or simply realizing a return.”
Lighter touch
Many observers say China’s capital markets are making progress,
even if it is slow. “They are moving towards the direction of being
more transparent and marketdriven under Beijing’s reforms,”
says Lau at KPMG. “With the
expected launch of the registration-based initial public offering
regime in 2016, the IPO application process will be streamlined
and over time it will be largely up
to the market to determine and
justify stock valuations.”
The Chinese population’s
accumulation of wealth over a
prolonged period of high economic
growth has fuelled the stock market’s gains in recent years. In June
2015, before the summer collapse,
the total value of Chinese stocks
rose above US$10 trillion for the
first time, making it more than
double the size of the Japanese
market.
The Shenzhen exchange began
trading unofficially in 1987 and
the Shanghai bourse opened in
1990. However, in 2015, only 7
percent of urban Chinese owned
shares, according to Citibank data,
with most investments held as
property and bank deposits.
More recently, many Chinese
investors have turned to wealth
management products because
they see the stock market as not
only unpredictable but overvalued.
Lu at UBS notes that the A-share
small-cap ChiNext index is now
around 80 times price/earnings,
compared with the equivalent
Hong Kong index trading at only
about 20 times price/earnings.
Thus the markets might need
to brace for further drops before
there’s any chance of reaching an
attractive equilibrium. “Chinese
A-shares remain overvalued
because of the government’s
intervention to stave off market
collapse last summer,” Arthur
Kroeber, Managing Director of
Dragonomics, an independent
economic research firm in Beijing,
wrote in a note to clients this
month. “Until share prices are
allowed to find their true level, the
market will be jittery.”
While the government could
act more decisively to prevent
further sell-offs, economists are
betting that Beijing might govern
the markets with a lighter hand
in 2016. “The bottom line is not
more strong policy stimulus,”
forecasts Helen Qiao, Greater
China Chief Economist at Bank of
America Merrill Lynch, “but that
the government will allow
the market to play a more
important role.”
January 2016 31
Success ingredient
Ma Chan-chi
A COMPLEX
JOURNEY
Ma Chan-chi started small at a big Hong Kong
bank and today holds top positions at CCB (Asia).
He tells Cathy Holcombe his route from junior
bookkeeper to CPA to CFO in a fast-growing and
increasingly complex financial sector
Photography by Jayne Russell
32 January 2016
aplus
Ma also sits on a
number of Hong
Kong advisory and
industry association
committees, such
as the Hong Kong
Institute of Bankers
January 2016 33
Success ingredient
Ma Chan-chi
34 January 2016
aplus
M
a Chan-chi remembers
filing a four-page report
when he was section
head for the regulatory reporting team at the first bank that he
worked for. Today there are more
than 10 such regulatory reports
that need to be filed, and some of
them are more than 20 pages. “So
you can see the difference 30 years
ago comparing with nowadays,”
says Ma, Deputy Chief Executive
and Chief Financial Officer at
China Construction Bank (Asia),
and a member of the Hong Kong
Institute of CPAs.
There are a number of reasons
for the growing complexity, starting
with rapid technological change that
has been challenging, particularly
in the Mainland where banks such
as CCB traditionally faced with
limited competition, but now deal
with constant change in relatively
unregulated new frontiers.
“I think that you have heard
of some non-banking corporations, which have expanded into
financial services by providing
e-commerce services,” says Ma.
“They have introduced e-payment
or mobile payment services, which
have huge implications on the
future of banking industry.”
Ma also cites the dynamic
changes that have been seen in
accounting standards, such as
IAS 39 Financial Instruments:
Recognition and Measurement,
introduced in 2005. Now his team
is preparing for the introduction
of IFRS 9 Financial Instruments.
“Both standards are very complicated and sophisticated, involving
a lot of model design and numerical
analysis,” he points out.
Regulatory challenges have
also been magnified in recent
years, especially after the Hong
Kong Monetary Authority implemented new anti-money laundering and anti-tax evasion rules.
Finally, Ma has faced the
challenge of implementing a new
organizational system developed
by the parent company. This
comprehensive system spans all
banking activities, from front
to back to middle office. As the
largest overseas arm of the CCB
group, the Hong Kong operation
is playing a large role in overseas
implementation, and has committed commensurate staff resources.
“Non-banking
corporations
have introduced
e-payment or mobile payment services, which have
huge implications
on the future of
banking industry.”
Ma, who currently oversees
sweeping functions in today’s
intensely complex regulatory, technological and accounting environment, looks back on how he first
gained entry to the world of banking
with a simple skill-set: bookkeeping
and typing.
It all began for him with a
qualification he obtained from the
London Chamber of Commerce
and Industry, a common ticket for
youngsters to get in the door at
big company, when Ma graduated
from secondary school in the late
1970s.
“Most people at that time were
not wealthy and the parents usually
wanted their children to have a
stable job, to work in a large or reputable company,” Ma explains.
His LCCI qualifications for
bookkeeping and typing landed
him a position at a sizable local
bank, where he was assigned to the
accounting department straight out
of secondary school. “That is where
I started my accounting career,”
he says.
Ma expected, however, that he
would never get far without higher
educational qualifications. So in
time he started part-time studies at
Hong Kong Polytechnic, where the
business school prepared students
for the Chartered Institute of Bankers qualification.
The banking diploma in turn
allowed him to sit for the Institute
exams. Still working, he studied in
his leisure time or in the 90-minute ferry ride from his home to
Central. After four years, in 1991,
he obtained his CPA qualification.
“No secret but to work hard,” he says
of juggling a full-time job with an
ambitious academic schedule.
Ma believes his accounting
background not only qualified him
to later take on senior roles like
being a CFO, but also to deal with
the myriad operational, functional
and competitive challenges in the
fast-changing financial industry.
“To be a qualified accountant I
think we should have good analytical skills, logical thinking, a strong
accounting concept and knowledge,
good management skills and, of
course, a good internal control
sense,” says Ma. “All these characteristics can help me manage my
current scope of work.”
Moreover, as a freshly minted
CPA back in 1991, the qualification helped him get a promotion
that set his career path on a sharply
upward trajectory.
When CCB (Asia)
took over the
Bank of America
(Asia) operations,
there were 17
branches and
about 700 staff.
CCB (Asia)’s
number of staff
has nearly tripled
now and as of
June 2015, it had
HK$500 billion in
assets, a growth
of more than 10
times since the
acquisition
January 2016 35
Success ingredient
Ma Chan-chi
From front office to
new frontiers
Things began to move quickly for
Ma – though he still managed to find
time to pick up a master’s degree in
business administration from the
University of Strathclyde in Scotland in 1995.
He was promoted to head the
treasury administration team
responsible for treasury finance,
product controls and operations.
This familiarized him with many
different types of banking businesses, from front to back office,
from asset management to insurance and treasury settlement, and
from systems accounting to risk
management and internal control
mechanisms.
Later, he was seconded to work
in London, widening his experience
further. By the mid-2000s, he was
given a breakthrough assignment: to
set up a locally incorporated bank in
China in 2007.
“At that time, China was allowing foreign banks to enter to set up
locally incorporated banks instead
of just allowing to operate as
branch,” recalls Ma.
Once he finished with this
milestone assignment, Ma stayed in
China, joining another sizable local
bank. His first mission there was to
set up another locally incorporated
bank in Shanghai, which made
him one of the first individuals to
have experience in setting up two
Mainland-incorporated banks.
Meanwhile, China’s major
financial institutions were
expanding outside the country.
China Construction Bank, the
Mainland’s second largest bank
by assets already had operations
in Hong Kong since 1995. It took
36 January 2016
over Bank of America (Asia) in
2006, which was later renamed
China Construction Bank (Asia)
in the same year. “I understood the
expansion of CCB (Asia) would be
very fast. And also provide me with
a platform so I can use my previous
experience gained both in Hong
Kong and China,” says Ma, who
moved to CCB (Asia) in 2010. “And
honestly, after working for four
years in China, I also wanted to
move back to Hong Kong to spend
more time with my family.”
When CCB (Asia) took over the
Bank of America (Asia) operations,
there were 17 branches and about
700 staff. CCB (Asia)’s number of
staff has nearly tripled now and as
of June 2015, it had HK$500 billion
in assets, a growth of more than 10
times since the acquisition.
CCB (Asia) integrated with
CCB Hong Kong branch in 2013 to
achieve synergy, but still has two
banking licences, which were necessary to support the rapid growth of
the business. After the integration,
CCB (Asia) expanded Ma’s role to
Deputy Chief Executive, in addition
to his CFO role.
A key factor in CCB (Asia)’s
expansion is the clout and massive
operations of the parent company,
which funnels business opportunities and expertise to its Hong
Kong subsidiary. Policies such as
renminbi internationalization and
One Belt, One Road also facilitate
cross-border business flows for
CCB (Asia).
In 2014, Ma became company
secretary for China Construction
Bank. He also sits on a number of
Hong Kong advisory and industry
association committees, such as
the Hong Kong Institute of Bankers
“I understood the expansion
of CCB (Asia) would be very
fast. And also provide me
with a platform so I can use
my previous experience
gained both in Hong Kong
and China.”
and the Banking Industry Training
Advisory Committee.
Complicated challenges
As Ma observes, banking has
become much more challenging over the past three decades.
Indeed, the industry has become
so complex that young recruits can
no longer hope to get in the door
with a bookkeeping qualification.
Moreover, even those with all the
right stuff are less likely to do
what Ma did as a young man: to
stay with the same bank, working
long hours and in many different
aplus
posts so as to comprehensively
master the business.
“We find it sometimes difficult
in recruiting experienced accountants or getting the university
graduates with accounting degrees
to join the banking profession,”
notes Ma. “I think some of the new
generation are not willing to work
in banks, which is a demanding
job with long hours, many business targets to meet, ever-changing regulatory and accounting
standards, and with technology
moving faster than before.”
When Ma first entered the pro-
fession, he felt very lucky to get a
job with a big bank. “At that time in
Hong Kong it was not easy to find a
good job,” he says. In contrast, the
new generation is confident enough
in their prospects to resign on a
whim and “maybe take a holiday
and then come back and find
another job.”
This is a Hong Kong-wide problem but PRC-based banks such as
CCB (Asia) might have an advantage in meeting the challenge. Ma
is exploring the idea of migrating
some back office jobs to China Construction Bank’s massive Mainland
operations. While human resources
costs in Shenzhen, Shanghai or
Beijing are similar to Hong Kong,
locales in other large but more
remote cities, such as Chengdu or
Chongqing, have good talent pools
but potentially less pricy and more
flexible young professionals.
“We are just undergoing some
reviews to… ease the working pressure in Hong Kong,” says Ma. While
recruitment and human resources
are yet another challenge for him, he
has acquired a lot of practice
in dealing with rapid and
far-reaching change.
January 2016 37
Work-life balance
CPA couples
Greater growth
Relationships are about more than
understanding and commitment between
two people – the best ones lead to creating
something greater than the sum of their
parts. Tigger Chaturabul talks to CPAs who
have gone on to achieving more by doing so
as a couple
Photography by Juliet Shayne Lui
I
t wasn’t love at first sight but
Gary Au has been supporting
Fiona Li in her endeavours from
the very start. He first saw Li as she
ran to the finish line of the Walk
Up Jardine House fundraising
event, which took place where Au
previously worked in the finance
department. The corporate volunteer was stationed on the 49th floor
of Jardine House and when Li, who
was representing the Hong Kong
Institute of CPAs team, ran up the
last steps of the race, she could hear
someone yelling, “Go CPA! Go!”
“At that time, I didn’t know
Fiona yet,” says Au, a member of
the Institute and now Manager
of Finance and Operations at
information technology company
SUNeVision Holdings, “but when I
saw a CPA approaching the finish
line, I had to cheer for her.” Au
was later introduced to Li, Internal
Audit Manager at CITIC Pacific
and an Institute member, at a reunion party for participants of the
Institute’s singing contest where
they both recalled their attendance
in the Walk Up event. Au entered
the singing contest but while he
didn’t make it past the preliminary
rounds, ended up making new CPA
38 January 2016
friends who love to sing. These
friends knew Li from the Dragon
Boat Interest Group and invited
her to the reunion for some CPA
socialization.
Some CPA couples, like Au and
Li, inspire growth in one another.
Whether they attend Institute
events together or explore the
professional skills of their partner
and apply it to their own work,
these CPAs are more than husband
and wife – they enrich each other
to become better individuals.
“After I found out that the CPA
from the charity run was in fact
Fiona, my first impression was
that she was very sporty, active
and immensely selfless for joining
voluntary services to represent the
Institute,” says Au. In addition to
the fundraising event, Au and Li
realized they were both part of the
Institute’s Accountant Ambassadors programme.
“We really wanted to conduct
a Rich Kid, Poor Kid session
together to let secondary school
students to have more financial
management knowledge,” says
Li. “However, after we enrolled
a few months before the event,
a business trip came up and we
aplus
“My first impression was that she was very
sporty, active and immensely selfless for joining
voluntary services to represent the Institute.”
Gary Au and
Fiona Li at
the park
January 2016 39
Work-life balance
CPA couples
missed that opportunity.”
Unexpected disruptions to their
schedules are something that Au
and Li jointly understand. “We
really speak the same [CPA] language and even when we can’t be
together for our important dates,
we understand that,” says Au.
As they got to know each other
more through outings organized
by their CPA friends, Li learned
that Au was good at badminton.
“I was a member of the Badminton Interest Group and I told
him we sometimes played with
other CPAs. After that, he joined
ASAP,” says Li. “I joined because
I liked badminton,” Au declares
with a smile.
Although Au and Li have different interests, one of them can
usually be found in the crowd
shouting words of encouragement
to the other. During international
dragon boat festivals and open
races in Tsim Sha Tsui, Au is on
the sidelines supporting the Institute’s Dragon Boat Interest Group
and cheering for Li.
Similarly, Li will be there for
Au during the Standard Chartered Hong Kong Marathon as he
runs to beat his best times in 10
kilometre and half marathon races.
“The HKICPA is a member of the
Recreation and Sports Club for
Hong Kong Professional Bodies,
which awards participants of the
Standard Chartered marathon outstanding runner awards. I won the
team relay and individual award in
2013,” explains Au.
The differences in their job
roles and tasks allow the couple
to really understand the kinds of
pressure their other half faces at
work. “Fiona is an internal auditor
so she knows how much tension
there is for me to make sure the
40 January 2016
Li and Au with
their 11-monthold daughter
Stephanie
aplus
Julian Sun and
Alisa Lee met on
an ecological trip
organized by their
churches
figures are 100 percent correct,”
says Au.
The pair continue to participate
in voluntary services with the
Institute and their own firms, with
Au sometimes joining activities hosted by Li’s company as a
couple. “Giving back to society is
one of our common interests,” says
Au. “I like people who are helpful
and do community services,” says
Li. “Gary joined many voluntary activities organized by the
Institute so he was invited to be a
speaker at a young members’ event
about making a difference to society. He’s amazing actually.”
Mind and spirit
Julian Sun and Alisa Lee met at a
cross-church ecological day trip in
2006 to Tap Mun Island, known for
panoramic sea views and campgrounds. They are both Christians
and members of the Institute.
Sun is an Information Technology Project Manager at a multinational law firm, specializing
in finance software, while Lee
is an Audit Learning Manager at
Grant Thornton. “When she first
introduced herself, I was surprised
to learn that she was not only a
qualified CPA but also studying
theology for a Christian studies diploma,” says Sun. “It was a unique
thing about her because even as
a busy CPA, she was able to find
time for this, and it’s actually unrelated to her career.”
During the trip, Lee remembers
taking a boat out to view coral
species in protected Hong Kong
waters. “Julian was a group leader
during the trip and his sincerity
made me feel like I could fully
trust him,” she says. “As we got
to know each other, we realized
our backgrounds were even more
January 2016 41
Work-life balance
CPA couples
42 January 2016
aplus
“I always wanted my partner to be a
Christian. When Julian turned out to
be a CPA, it was a bonus.”
Lee and Sun
enjoy taking the
opportunity to date
and earn CPD hours
simultaneously
similar, in that we both came from
non-Christian families and were
each others’ first partners.” Their
beliefs led them to be quite serious about being in relationships,
choosing to refrain from dating
if they weren’t completely sure if
it was love. “I always wanted my
partner to be a Christian,” says
Lee. “When Julian turned out to be
a CPA, it was a bonus.”
Before the couple got married
in 2009, they often went to church
activities together, whether it was
chaperoning teenagers at an event
or attending a Stephen Tong bible
study. Tong is an influential theologian, pastor and evangelist who
heads the Reformed Evangelical
Church of Indonesia.
The best use of their time,
however, is when they can date and
earn continuing professional development hours at the same time.
Sun is a member of the Institute’s
Information Technology Interest
Group and when they hosted a
site visit to Ngong Ping 360, Lee
couldn’t resist the urge to join in
as well. “They took us to visit the
depot of the cable car, understand
how the wires work and take a ride
for a practical session on technology,” Sun explains.
“We try to go to these fun
Institute events together but when
it’s something more serious like
an IFRS update, we take turns
because we want someone to send
our daughter, Isabeth, to sleep,”
says Lee.
The parents keep a close eye
on their five-year-old to predict
her future habits. “Judging from
the way she spends points in iPad
games, we’re worried she might
really spend a lot later,” laughs
Lee. “As CPAs, we have a similar
budgeting mindset when it comes
to family matters so we will teach
her to save and not get into buying
luxury things too early.”
One of their relationship quirks
is their tendency to use accounting jargon to communicate in
daily life. “For example, when our
daughter did not perform as expected during a school interview,
we simply said to each other that
we need to make a provision on
this event,” explains Lee.
While their similarities are a
great source of strength for the
couple, their differences were also
a point of attraction when they got
to know more about each other.
“In our house right now, all of my
daughter’s toys are on the floor
and my husband’s toys are stored
near the ceiling,” Lee says with
a smile, referring to the Gundam
figurines and models Sun has been
collecting. “It was quite cute to
know about his interests when we
started dating and he used to introduce all the different models and
roles to me, including Japanese
cartoon songs and how their meanings have changed over the years.”
Lee has also taught Sun useful
things about her accounting field,
which is vastly different from
Sun’s IT specialization. “Since
she is in audit, I asked her about
things related to internal control,”
he says. “I can use this internal
control concept to build up software that can improve the
corporate governance in
my company.”
January 2016 43
Source
Taxation
Benefits-in-kind capable of converting into
money is taxable at the time of receipt
Kathy Kun and Patrick Kwong explain how determining
the taxability and timing of taxation of non-cash benefit
granted to employees can be a complicated process
In the recent annual meeting between
the Hong Kong Institute of CPAs and the
Inland Revenue Department, the IRD
re-affirms that non-cash benefit, such as
company products provided to employees free-of-charge and not required for
them to return to the employer, is taxable
if such products can be converted into
money. The timing of taxation is when
the employee gains possession of the
relevant products. The resell restriction
attached to the terms of use imposed by
the employer would not alter the taxability and timing of taxation of the benefit
concerned.
Determining the taxability and timing
of taxation of non-cash benefit granted to
employees depends on the peculiar nature
and circumstances under which such benefit was provided. Taxpayers should seek
professional advice where necessary.
Taxability of benefits-in-kind
received by employee
Benefits received by an employee that
does not take the form of money are often
called benefits-in-kind. These benefits
count as “income from employment”
and are chargeable to salaries tax if
they took the form of “money’s worth.” A
benefit would be regarded as constituting “money’s worth” if it is capable of
being converted into money either by sale
or some other means in the employee’s
hands or involved the discharge of an
employee’s personal liability.
Where a benefit takes the form of an
asset, which can be converted into money,
the amount that is treated as earnings for
44 January 2016
salaries tax purposes is the amount that
the employee could get for the item if he or
she were to dispose of it as soon as it came
into their possession, i.e. the “secondhand” value.
Where a benefit involved the discharge
of an employee’s personal liability, the
amount of the liability so discharged by the
employer would be regarded as constituting money’s worth and thus a chargeable
benefit.
The Institute’s questions
It is common nowadays for employers to
provide their employees with their own
products free-of-charge to promote their
brand names, e.g. mobile companies providing mobile phones to their employees.
While the employees are not required
to return the products to their employers upon cessation of employment,
employers would usually impose certain
restrictions on the assets granted, such
as requiring the employees to undertake
that they would solely use the products
themselves and would not resell the
products to third parties.
The Institute asked, whether the IRD
would agree with their views that these
benefits-in-kind would be treated as nontaxable on the grounds that they are not
convertible benefits (as the products are
not intended for re-sale by the employees)
and they do not represent a discharge of
the employees’ personal liability (as the
employer directly provides the products to
the employees).
In the event the IRD considered that
the products granted constitute money’s
worth benefits that are liable to tax, the
Institute asked whether the taxing point of
time would be deferred to the time of cessation of employment. The Institute considered that this would be the case as the
employee has undertaken not to resell the
products received while he was employed.
The restriction to resell would only be
lifted upon cessation of employment.
As regards the employer’s reporting
obligation, the Institute noted that the
resale values of the benefits granted were
usually small, or even nil in some cases.
To ease the administrative and reporting burdens of employers, the Institute
requested the IRD to give practical
guidance on reporting such benefits in
the employer’s returns. Apparently, they
were suggesting to the IRD to consider
discharging employers from reporting
benefits-in-kind with taxable values below
certain threshold.
IRD’s reply
Taxability of benefit granted
The IRD responded that unless covered
by specific provisions, benefits-in-kind
received by employees would be treated as
taxable income pursuant to the prevailing tax code and case law principles. That
means, the benefits received are assessable if such benefits were capable of being
converted into money, through sale or some
other means, or involved the discharge of a
personal liability of the employee.
Applying the principles to the above
example, the IRD considered that if the
employees were allowed to use the
aplus
products provided by the employers for
private purposes free-of-charge, and the
employees were not in any way able to
convert the benefit into money, the IRD
agreed the benefit was not be chargeable
to tax.
On the other hand, if the ownership
of the products was transferred to the
employees, and the employees were not
required to return them to their employers when they left employment, the IRD
took the view that the benefit received
was chargeable benefit liable to salaries
tax. The amount subject to tax would be
“second-hand” value of the products at the
time of receipt.
As such, the taxability of such benefits
hinges on whether (i) ownership of the
products concerned was passed to the
employees; and (ii) the products were convertible into money. The resell restriction
attached to the products was only a factor
for consideration but was not conclusive.
Timing of taxation
The IRD reiterated that the taxing point of
time is when the benefit is received by the
employee. If the ownership of the products
was passed to the employee at the time of
its provision, the benefit was accrued to
the employee at the time of receipt of such
products. The undertaking made by the
employees not to resell the products was
again, a factor for consideration only but
was not conclusive.
Whether and when the ownership of an
asset was passed to the employee are primarily questions of facts which depend on
the peculiar circumstances of each case.
In this regard, the IRD pointed out that the
letter of acknowledgement of receipt of
the asset and the related terms signed
by an employee would serve as a piece of
evidence to show when and whether the
ownership of the product was passed to
the employee.
Employer’s reporting obligation
Being an administrator of the tax law, the
IRD stressed that it was bound to administer the law as it was. As required by the
law, employers are obliged to file proper
and correct employer’s returns in respect
of remunerations accrued to their employees and to maintain the records required
for this purpose. Therefore, employers
are required to report benefits-in-kind
that are money’s worth provided to their
employees. And the reportable amount is
the “second-hand” value of the relevant
products based on their best estimation.
Neither the quantum of a taxable remuneration nor the administrative burden on
the employer in keeping the records would
justify concessionary treatment.
Kathy Kun is Tax
Senior Manager and
Patrick Kwong is
Tax Executive
Director at EY
January 2016 45
Source
Risk management
The role of internal auditors in
enterprise risk management
Roy Lo looks at how internal auditing can create value for
organizations amid changing reporting requirements
The Hong Kong stock exchange concluded
the consultation paper on risk management and internal control and amended
the Corporate Governance Code, which
becomes effective for accounting periods
beginning on or after 1 January 2016.
HKEx emphasized that internal control is
an integrated part of risk management and
the internal audit function plays an important role in ensuring the effectiveness of
a listed company’s risk management and
internal control systems. Although risk
management is not a new idea to professional accountants, what exactly should
internal auditors do to address these
changes and create values for its
organization?
Enterprise risk management
Organizations face uncertainties, which
emanate from the inability to determine
the likelihood of an event and the associated impacts. Uncertainties, which can be
further classified as risk and opportunity,
may erode or enhance value. Enterprise
risk management allows management
to effectively deal with uncertainties and
eventually enhance the organizations’
capacity to build value. ERM is defined as
follows by the Committee of Sponsoring
Organizations of the Treadway Commission: “ERM is a process, effected by an
entity’s board of directors, management
and other personnel, applied in strategy setting and across the enterprise,
designed to identify potential events that
may affect the entity, and manage risk to
be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.”
46 January 2016
According the ERM Framework issued
by COSO, ERM assists an organization to
align risk appetite and strategy, and to
enhance risk-response decisions. It also
helps to reduce operational surprises and
losses, providing integrated responses
to multiple risks. Eventually, it may allow
management to seize opportunities and
improve deployment of capital.
Responsibilities of the board
and management
Responsibilities of the board and management on ERM are clearly stated in
the international frameworks (such as
the ERM Framework) and the Corporate
Governance Code.
Generally, the board should oversee the
ERM by:
• Knowing the extent of ERM within the
organization;
• Reviewing the risk portfolio of the
organization and considering it against
the risk appetite;
• Understanding the changes and significant risks the organization is facing;
and
• Considering whether the risk responses
are appropriate or not.
Management, on the other hand, is
directly responsible for the ERM. They are
responsible for the design, implementation and monitoring of it. There is no rigid
definition of management, but it normally
includes the chief executive officer (who
has ultimate ownership responsibility for
the ERM), chief financial officer (who has
responsibility in handling financial reporting risks and compliance risks) and chief
operating officer (who is responsible for
handling operation risks).
Role of an internal auditor
Due to the new demands from the board
and management, the role of an internal
auditor shifts from a control-focus advisor, to a consultant who creates value by
supporting the organization’s objectives,
monitoring enterprise risks and ensuring
the effectiveness of the internal control
framework. Internal auditors should consider whether the upcoming activities will
affect their independence and objectivity
or not.
Core internal audit roles in regard to
ERM
The Institute of Internal Auditors states
that “Internal auditing has a core role
with regard to ERM, which is to provide
objective assurance to the board on the
effectiveness of risk management.” The
IIA Position Paper: The Role of Internal
Auditing in Enterprise-wide Risk Management suggests that internal auditors can
provide the following assurance activities:
• Giving an assurance on the risk management processes;
• Giving an assurance that risks are correctly evaluated;
• Evaluating risk management
processes;
• Evaluating the reporting of key risks;
and
• Reviewing the management of key
risks.
Determining whether the ERM is effective
is a judgment resulting from the internal
aplus
ance to management on its decision
making;
• Internal auditing cannot give assurance
on any part of the ERM framework in
which it is responsible for.
auditor’s assessment showing that:
• Organizational objectives support and
align with the organization’s mission;
• Significant risks are identified and
assessed;
• Appropriate risk responses are
selected that align risks with organization’s risk appetite; and
• Relevant risk information is captured
and communicated in a timely manner
across the organization, enabling staff,
management and the board to carry out
their responsibilities.
Apart from assurances provided by the
internal auditor, the board should obtain
assurances from other sources such as
management, external auditor and legal
advisors. Under the Corporate Governance
Code, the management should provide a
confirmation to the board on the effectiveness of risk management and internal
control systems.
Other consulting activities
In the early stages of introducing ERM to
an organization, internal auditors may act
as a project manager to provide consulting services for improving the governance
and risk management process. When risk
management embeds in normal operations, internal auditing roles should shift
back to assurance roles. The IIA’s position
paper suggests that the following consulting roles, with appropriate safeguards, can
be taken up by internal auditors:
• Developing risk management strategy
for board approval;
• Championing establishment of ERM;
• Maintaining and developing the ERM
framework;
• Consolidating the reporting on risks;
• Coordinating ERM activities;
• Coaching management in response to
risks; and
• Facilitating identification and evaluation of risks.
Appropriate safeguards include but are
not limited to:
• Management remains responsible for
risk management system;
• Internal auditor’s responsibilities, plan
of work and the responsible teams
should be properly documented;
• Internal auditing should not manage
risks on behalf of managements, it
should instead provide advice and guid-
Last but not least, the position paper
suggests that internal auditors should not
undertake the role of:
• Setting the risk appetite;
• Imposing risk management process;
• Management’s assurance on risks;
• Making decisions on risk responses;
• Implementing risk responses on management’s behalf; and
• Accountability of risk management.
Conclusion
Internal auditors can assist an organization to achieve its objectives by not only
utilizing its “process or control-based”
knowledge, but also “risk-based” knowledge. In addition, by facilitating the management on risk assessment, consolidating key risks faced by the organization,
evaluating ERM and enhancing the internal control systems, internal auditing can
create value for the organization.
Roy Lo is Managing
Partner at ShineWing
(HK) CPA
January 2016 47
Source
Technical update
Provision of non-assurance
services to audit clients
Audit firms have traditionally provided
their audit clients with a variety of nonassurance services that are consistent
with their skills and expertise. This
is an efficient and effective way for
companies to take advantage of the
knowledge that their external advisors
have of their business and operation.
In addition, an independent viewpoint
from external advisors can often shed
light on specialist areas or intractable
internal issues within an organization.
Common non-assurance services provided by audit firms include:
• Company secretarial services
• Accounting and bookkeeping
services
• Taxation services
• Valuation services
• Information technology system
services
However, providing non-assurance
services to audit clients may create
threats to the independence of the
audit firm. The threats created are
most often self-review, self-interest
and advocacy threats.
Ethical requirements under the
Institute’s code
The Hong Kong Institute of CPAs’ Code
of Ethics for Professional Accountants
sets out the ethical requirements in
relation to the provision of non-assurance services to audit clients. Practi48 January 2016
tioners are reminded of the following
considerations when providing nonassurance services to an audit client:
• Audit firms should perform “threats
and safeguards” evaluation before
accepting an engagement to provide
a non-assurance service to an
audit client. If a threat is created
that cannot be reduced to an
acceptable level by the application
of safeguards, the non-assurance
service should not be provided.
Firms are reminded to document the
relevant facts and circumstances
and the determination on the threats
and safeguards evaluation.
• Under paragraph 290.162 of the
code, audit firms shall not assume
a management responsibility
for an audit client. Assuming a
management responsibility for an
audit client creates threats that
would be so significant that no
safeguards could reduce the threats
to an acceptable level. However,
activities that are routine and
administrative, or involve matters
that are insignificant, generally are
deemed not to be a management
responsibility.
• If a firm is deemed to be a network
firm, the firm shall be independent
of the audit clients of the other
firms within the network (unless
otherwise stated in the code). The
independence requirements that
apply to a network firm shall apply
to any entity, such as consulting
practice or professional law
practice, which meets the definition
of a network firm. For further
guidance on networks and network
firms, please refer to paragraphs
290.13-24 of the code.
• The code contains more stringent
independence requirements in
respect of audits of public interest
entities. There are limitations on the
type and extent of non-assurance
services that can be offered to
audit clients that are public interest
entities. For example, audit firms
are prohibited from providing
bookkeeping and accounting
services, and tax calculation services
to audit clients that are public
interest entities, except in emergency
situations. Firms are reminded that
public interest entities include all
listed entities and any additional
entities, or certain categories of
entities, that they determine to treat
as public interest entities.
• When the total fees from an audit
client represent a large proportion
of the total fees of the audit firm,
the dependence on that client
and concern about losing the
client creates a self-interest or
intimidation threat. Firms should
evaluate the significance of such
treats and apply appropriate
aplus
safeguards. If an audit client is a
public interest entity and, for two
consecutive years, the total fees
from the client and its related
entities represent more than 15
percent of the total fees received
by the firm, the firm is required
to disclose to those charged with
governance of the audit client such
fact and the safeguards applied.
Members are advised to read the
code for details of the independence
provisions. Small- and medium-sized
practitioners can also refer to Ethics
Circular 1 Guidance for Small and
Medium Practitioners on the Code of
Ethics for Professional Accountants
issued by the Institute for more
guidance on the adoption of the code
on the provision of non-assurance
services to an audit client.
Update to the independence
provisions
In July 2015, the Institute’s code was
updated in response to the International
Ethics Standards Board for Accountants’
pronouncement on Changes to the Code
Addressing Certain Non-Assurance Services Provisions for Audit and Assurance
Clients. The update aims to reinforce the
independence provisions in the code and
at the same time, promote greater consistency of application of the provisions.
The revised provisions include:
• Removal of provisions that permitted an audit firm to provide certain
bookkeeping and taxation services
to audit clients that are public interest entities in emergency situations;
• Providing new and clarified guidance
regarding what constitutes management responsibility; and
• Providing clarified guidance regarding
the concept of “routine or mechanical”
services relating to the preparation
of accounting records and financial
statements for audit clients that are
not public interest entities.
The above revisions also include
corresponding changes to the code’s
non-assurance services provisions with
respect to other assurance clients.
The changes will be effective on 15
April, except for the changes to the
independence requirements for audit
engagements and review engagements
(i.e. section 290 of the code) which
will be effective for audits of financial
statements for periods commencing
on or after 15 April. Early adoption is
permitted.
This article is
contributed by
the Institute’s
Standard Setting
Department
January 2016 49
Source
TechWatch
TechWatch
The latest standards and
technical developments
Member’s handbook
Update no. 176 contains revised 1.101A
Guidelines for the Chairman and the Committee on Administering the Disciplinary
Committee Proceedings Rules.
Financial reporting
Invitations to comment on IASB
exposure drafts
(i) I FRS Practice Statement: Application
of Materiality to Financial Statements
The draft guidance, in the form of a
draft practice statement, has been
developed in response to concerns
that management are often uncertain about how to apply the concept
of materiality and therefore use the
disclosure requirements in the standards as a checklist.
Whether information is material
or not depends on a range of factors
and entity-specific circumstances,
and is a matter of judgment. Determining what information is material
also requires an understanding of the
users of the financial statements and
the decisions that they make based
on those financial statements.
Improving the quality and
quantity of disclosures requires
joint efforts by auditors, regulators,
companies and standard-setters.
The International Accounting Standards Board has therefore consulted
with the International Auditing and
Assurance Standards Board and
the International Organization of
Securities Commissions during the
development of the draft practice
statement.
50 January 2016
158
The draft guidance on materiality
complements an amendment made
to IAS 1 Presentation of Financial
Statements by the IASB in 2014,
which clarified that companies do not
need to apply the specific disclosure
requirements in standards if the
related information is not material.
It also specified that a company
should consider whether to provide
additional disclosures when compliance with the specific requirements
would be insufficient in disclosing
material information. Comments are
requested by 22 January.
(ii) T
ransfers of Investment Property (Proposed amendment to IAS 40)
The exposure draft proposes a
narrow-scope amendment to IAS 40
Investment Property to clarify the guidance on transfers to, or from, investment properties.
Paragraph 57 of the standard
provides related guidance. However, it
does not specifically address whether
a property under construction or
development that was previously
classified as inventory could be transferred to investment property when
there is an evident change in use.
The IASB proposes to amend
paragraph 57 of IAS 40 to:
• State that an entity shall transfer
a property to, or from, investment
property when, and only when,
there is a change in use of a property supported by evidence that a
change in use has occurred; and
• Recharacterize the list of circumstances set out in paragraph
57(a)-(d) as a non-exhaustive
list of examples of evidence that
a change in use has occurred
instead of an exhaustive list.
Comments are requested by
19 February.
Audit and assurance
Institute comments on IAASB
exposure draft
The Institute commented on the International Auditing and Assurance Standards
Board exposure draft on Proposed ISA
810 (Revised) Engagements to Report on
Summary Financial Statements.
Though the proposed ISA 810 does
not contain all the enhancements from
ISA 700 (Revised) Forming an Opinion and
Reporting on Financial Statements such
as the statement about independence
and other relevant ethical responsibilities or the disclosure of the name of the
engagement partner of listed entities,
the Institute agrees with the IAASB’s
approach to revising proposed ISA 810.
The form and contents of the summary financial statements are set out
in the companies regulation. The regulation requires that the auditor forms
an opinion as to whether the summary
financial report is consistent with the
relevant financial documents or reporting documents from which it is derived
and whether it complies with the
requirements of relevant legislation.
The auditor is required to state whether
in his or her opinion the summary financial report is consistent with the annual
financial statements, directors’ report
and auditor’s report, and whether the
auditor’s report concerned is qualified
aplus
Institute’s Restructuring and Insolvency
Faculty made a submission during the
consultation phase of the proposals.
or otherwise modified.
Upon finalization of the proposed ISA
810, the Institute would supplement it
with local guidance to reflect the requirements set out in the regulation.
Professional accountants in
business
HKEx reports on implementation
of Corporate Governance Code and
Corporate Governance Report
Hong Kong Exchanges and Clearing has
published the findings of its latest review
of listed issuers’ corporate governance
practices, entitled “Analysis of Corporate
Governance Practice Disclosure in 2014
Annual Reports.” The review analysed
the 2014 annual reports of 1,237 listed
issuers, covering the financial period
from 1 January to 31 December 2014.
Findings of the review included the
following:
• 35 percent of issuers complied with
all the code provisions.
• 98 percent of issuers complied with
70 or more code provisions, out of 75.
• Issuers with a larger market capitalization achieved a higher overall compliance rate than those with a smaller
market capitalization.
explores what professional accountants
working in the public and private sectors
can do in practical terms to facilitate it in
their organization, regardless of whether
their organization is planning to publish
an integrated report.
The paper identifies five key elements,
which, if implemented, can lead to more
effective organizations. This ultimately
provides the basis for shifting from
today’s financially oriented reporting
to integrated reporting. The paper also
discusses how integrated reporting
improves and is improved by integrated
thinking. It also explores what integrated
thinking involves, as well as its challenges and how they can be overcome,
and advances a meaningful understanding of its role and power.
The review also included HKEx’s comments on the quality of the explanations
in relation to the five code provisions with
the lowest compliance rates.
Restructuring and insolvency
IFAC releases new thought paper
setting out a vision for integrated
thinking
With an aim to facilitate the contribution
of professional accountants to integrated
thinking, and help align capital allocation,
corporate behaviour, financial stability
and sustainable development, International Federation of Accountants has
published a new thought paper: Creating
Value with Integrated Thinking: The Role of
Professional Accountants. The paper sets
out a vision for integrated thinking and
Financial Institutions Resolutions Bill
introduced into the LegCo
The government has introduced the
Financial Institutions Resolutions Bill
into the Legislative Council. The bill
aims to establish a framework for
dealing with systemically important
financial institutions that face financial
distress, so as to reduce any risks to
the stability of the financial system as a
whole. The proposals seek to implement
international standards promulgated
by the Financial Stability Board. The
New arrangement for nominated
insolvency practitioners to attend
the first meetings in bankruptcy and
liquidation cases
The Official Receiver’s Office informs
the Institute that, after reviewing the
current arrangements and considering
creditors’ interests and rights, as well as
the need to ensure smooth meeting proceedings, it is proposed to introduce new
arrangements for permitting nominated
insolvency practitioners to attend the
first meetings in bankruptcy and liquidation cases. The new arrangements will
take effect on 1 February.
Taxation
Announcements by the Inland Revenue
Department
• Hong Kong has signed an agreement
on the avoidance of double taxation
with Romania.
• Inland Revenue (Amendment) (No.4)
Bill gazetted. The bill aims to introduce tax concessions for corporate
treasury centres, enhance the interest
deduction rules for intra-group financing and clarify the tax treatment of
regulatory capital securities issued
by banks, in compliance with Basel III
requirements.
• LegCo question on corporate treasury
centres.
• Taxpayer given immediate jail term
after review of sentence for falsely
claiming self-education allowances.
Please refer to the
full version of
TechWatch 158,
available as a PDF on
the Institute’s website:
www.hkicpa.org.hk
January 2016 51
After hours
Book review
Life and everything
A life in the day
Book review
IKEA is among the nine
businesses that Williams
calls "Green Giants"
because they offer a
product or service with
social good at its core
Taking giant steps
for sustainability
Title: Green Giants: How Smart Companies Turn Sustainability into Billion-Dollar Businesses
Author: E. Freya Williams
Publisher: AMACOM Books
The publication of E. Freya Williams’s book
about how companies can embrace sustainability and still grow profitably is timely.
From this month, the Hong Kong Exchanges
and Clearing sets a tighter Corporate Governance Code and imposes stricter obligations
for environmental, social and governance
disclosure for listed companies.
Williams, whose book profiles nine
groundbreaking companies, agrees that
tighter ESG disclosure mandates can spur
change in corporate conduct to mitigate
the effects of climate change (see author
interview on next page). Her basic criterion
to be included as a “green giant” is that a
company generates US$1 billion or more
52 January 2016
in annual revenue “directly attributable to
a product, service, or line of business with
sustainability or social good at its core.”
Some of her chosen nine are global
names, such as IKEA, Tesla Motors and
Unilever. Others, such as Chipotle Mexican Grill and Whole Foods Market, are
familiar mainly to residents of the United
States, while Natura Cosméticos is based
in Brazil. Three are included because of
specific business lines: General Electric
(Ecomagination), Nike (Flyknit shoes) and
Toyota (Prius).
Inevitably, some of the companies have
hit bumps since the book was published:
Chipotle shares have plunged in the wake
of bacterial outbreaks at its restaurants,
sales of Toyota’s pioneering Prius hybridpowered car have begun to decline and
Whole Foods’ revenues and share price fell
sharply in 2015.
Though devoted to sustainability, Williams, an Ogilvy veteran whose background is in marketing and branding, is no
wide-eyed hippie. She notes that to qualify
as a “green giant,” a company has to present a sound economic plan. For example,
the compelling business case at Chipotle –
a fast-food chain selling responsibly
sourced food – is “a US$9 burrito.”
Williams stresses the importance of
engaging financial professionals and is
aplus
a convert to integrated reporting. “An
integrated report helps you get beyond the
act of faith to a measurement framework
with clear goals and metrics, and the ability
to understand whether the new business
model is actually working.”
Given the concentration on the western
hemisphere, there is little mention of the
Asia-Pacific region, except to note that
Natura declined to enter China, a huge
potential market, because the company has
an ethical commitment against animal testing of cosmetics, which Beijing authorities
insist upon.
To be sure, it helps to be the boss. Steve
Ells founded Chipotle and was able to
unilaterally change from factory farming
to pasture-raised meat. But some companies changed due to more subtle pressure.
Williams charts the career of Hannah
Jones from BBC radio reporter to her
present role as Nike’s Chief Sustainability
Officer. Nike’s Flyknit woven material
technology produces much less waste than
other methods.
Another important part of the sustainability case is making an effective presentation. Williams contrasts the subtle sustainability message of the (until recently)
wildly successful Chipotle with the failure
of the trans-Atlantic vegan Otarian group
that played videos of slaughterhouse processing in its restaurants and whose owner
harangued potential investors about the
evils of meat.
Armed with plenty of evidence that
companies that lead in sustainable, social
and governance policies report higher stock
values than their less sustainable competitors, Williams presents a convincing
case for businesses to at least address the
options they have for reducing their impact
on our planet.
Altruism doesn’t even have to be the
prime motive: GE CEO Jeff Immelt, under
pressure from clients such as utilities and
railways that needed to meet new emissions and fuel consumption regulations
in the European Union and India, pushed
development of the Ecomagination line of
products, which are designed with better
environmental performance.
Author interview:
E. Freya Williams
In 2013, E. Freya Williams was working
at advertising giant Ogilvy & Mather and
searching for an answer to the question
– “Can purpose and profit co-exist?” –
for an essay. “I needed a better answer
than efficiencies, savings and corporate
reputation to convince the naysayers,”
she says from her office in New York.
She stumbled on the information
that Chipotle Mexican Grill, a restaurant
chain, had surpassed US$2 billion in
revenue in 2012, despite sourcing its
raw ingredients from ethical (and more
expensive) sources and
using its advertising
budget to advocate for
sustainable agriculture.
“Chipotle was bigger
than Burger King. I felt
this was information
that could help change
the entrenched belief
that sustainability is
somehow antithetical to
business,” she recalls.
“Chipotle [and eight
other companies that
Williams found] prove
it’s a way to make money,
and a lot of it.”
In the nine cases outlined in “Green
Giants,” a strategy for sustainability
has been driven by one person – often,
but not always, a chief executive or
founder. “Besides courage, commitment
and conviction, a key personality trait I
identified that the leaders share is their
contrarian streak,” Williams observes.
“My hope is that many more business
leaders will embrace the opportunity
and that contrarian streak will become
less important.”
Such leaders were also able to
engage their organizations to turn their
visions into reality. “These types of com-
panies also attract like-minded employees who want to play a part in their success,” she says, adding that engagement
must extend to the chief financial officer
and the finance department.
“The CFO plays a critical role in aligning these agendas, and helping measure
the business case. Nike is a strong
example of a company that reorganized
to enable this to happen. At Nike, CFO
Mark Blair is a key player in the success
of the sustainable business strategy.”
Her thesis is that this is the future of
business, she says. “As
investors increasingly
equate sustainability
with business performance and demands for
disclosure and accountability increase, it will
become part of the core
of the role.”
Williams praised the
Hong Kong Exchanges
and Clearing for introducing a stricter Corporate Governance Code
and tightening environmental, social and
governance disclosure.
“This can help enormously,” she says.
“The ‘Green Giants’ have done what
they’ve done voluntarily, and succeeded
anyway, but it works better when the
playing field is even. The transparency
that disclosure encourages is extremely
healthy.”
She was recently appointed Chief
Executive Officer of Futerra, a sustainability strategy and communications firm
with offices in New York, London and
Stockholm. “My focus for the time being
is ensuring that business leaders hear
about the new billion-dollar business
case for sustainability.”
January 2016 53
Life and everything
As recommended by Institute members
Lawry’s The Prime Rib
Venues for good company and good food by Keith Siu, Chief Financial Officer at Maxim’s Caterers Ltd.
Lawry’s The Prime Rib is my mostvisited prime rib house in Hong Kong and
the perfect location for family gatherings.
Prime rib is served in a silver cart that
goes around the tables and my children
love the actions that come with the
Spinning Bowl Salad and Baked Alaska
with table side service. Weekend brunch
here is also one of our favourites as well as
meeting friends at happy hour to catch up
over a glass of wine from their extensive
wine collection.
Sabatini is where my wife and I had
our first date and it easily became our
favourite. We visited the one in Rome and
found the ambience and experience very
consistent here in Hong Kong. The place
gives a true Italian vibe and offers great
wine and tasteful music performances.
Yakitoritei is great for casual gatherings
at the yakitori bar. I’m interested in the
vibrant ambience and it becomes a chill-out
joint for when I think of grill specials like
oysters and chicken inner organ dishes; not
everyone’s cup of tea but I quite enjoy them.
Edwin Yeung, an Institute Oxfam Trailwalker team member and
Managing Director at Edwin Yeung & Company (CPA) Limited,
recommends the best paths for hiking in Hong Kong
Hike
Trail running is an ideal hobby for anyone
living in Hong Kong because even the most
beautiful and hilly routes are easily accessible from urban areas. Weekly runs not only
enable one to maintain a healthy physique,
but are also enjoyable social activities that
bring like-minded people together.
Route for beginners: One of the most
interesting routes I would recommend
starts in Central and ends at The Peak. Start
by taking the mid-levels escalator up to the
very top then start running until you arrive
at the intersection between Conduit Road
and Kotewell Road; then go up Hatton
Road to reach The Peak. It only takes a few
hours and best of all, the route’s proximity
to the city means you get a lovely urban
54 January 2016
sightseeing experience in addition to all the
natural scenery on the way to The Peak.
Tips: Whether you’re a beginner or an
experienced runner, it’s important to take
certain precautions before embarking on
a hike or a run. First and foremost, never
go alone and always be sure to let your
family or friends know which route you
will be taking. Make sure to be wellprepared for the journey by planning
carefully and bringing essential supplies
such as water, energy drinks, food, a fully
charged phone, spare clothing, a first aid
kit, flashlight, etc. Don’t forget to practise
beforehand by going to the gym or if time
is tight, by occasionally taking the stairs
instead of the lift!
aplus
1
Jewels
Hamilton Cheng, Finance Director and Company
Secretary at Chow Tai Fook Jewellery Group,
with gift-giving tips for the season
Valentine’s Day is coming! No gentleman
would deny that picking the right present for
your beloved can be a very demanding task.
Diamonds are always the preferred choice.
However, focusing only on colour, clarity and
carat may no longer be enough to surprise or
satisfy your beloved nowadays, as these are
just native traits of diamonds.
In contrast, cutting is a more cultured
character deep inside the heart of a diamond,
which manifests the differences in brilliance
and beauty.
Recently introduced to Hong Kong, Hearts
on Fire – a premium diamond brand from
Boston – is well-known for “the world’s most
perfectly cut diamonds” selected from less than
0.1 percent of the world’s highest quality rough
diamonds. More importantly, they are carefully
cut with the brand’s “secret recipe,” the Hearts
and Fireburst pattern, which can be seen in
every single diamond, creating an amazing
phenomenon of light. You can always find
another diamond of the same colour, clarity and
carat but you can never find one that sparkles in
the same way as a Hearts on Fire diamond!
No matter how you celebrate perfect
moments with your beloved, acquire
something exceptional. This season, I have
picked the Lorelei Diamond Right Hand Ring
and the Illa Comet Pendant. I believe the lace
and star in the design can further highlight
her irresistible feminine charm.
2
1.Lorelei Diamond Right Hand Ring
2.Illa Comet Pendant
Go
Beach retreats and green getaways in Bali by Honnus Cheung,
Chief Financial Officer at Travelzoo Asia Pacific
Trips to Bali are known for being
both spiritual and cultural adventures. Nicknamed for being a living
postcard, the Indonesian island is
home to stretches of white sand and
tropical greenery, perfect for a relaxing weekend away from the city.
Where to stay:
Desa Seni is a village resort and a
yoga centre that’s self-contained.
A variety of retreats based on your
individual needs and goals are offered
in a lush community of antique wood
homes and organic gardens.
Hanging Gardens of Bali offers an
immersive experience in a natural
tropical environment with 44 private
villas built into the mountainside.
The luxury 5-star hotel offers awardwinning spa treatments, gourmet
dining and cable cars to get around the
vertical resort.
Where to eat:
Rock Bar Bali at the Ayana Resort
offers an unbeatable view of the sunset
with an open-top bar 14 metres above
the Indian Ocean. It’s the perfect setting for a romantic night by the sea.
Merah Putih puts a twist on classic
family-style Indonesian food with a
menu that serves traditional regional
dishes. They are simply cooked to
highlight locally sourced produce and
modern culinary creations that fuse
together traditional ingredients with
contemporary flair.
January 2016 55
A life in the day
…. with Nury Vittachi
A heart of art
The Hong Kong humourist meets Florence Kong,
Finance Director of architectural firm 10 Design
A
rt and money need each
other. “When you give
money to artists, you are
yourself doing an artist’s work,”
said Dutch painter Vincent van
Gogh. “Good business is art,”
pop-art stylist Andy Warhol added,
years later.
The relationship between fine
art and making a living were
among the considerations in the
life of a teenager Florence Kong
when she was making choices for
her future.
She was the daughter of Kong
Lap-fung, a successful artist, and
she grew up in a home full of beautiful Chinese art. Florence herself
inherited a love of art and design,
and also loved music. Yet she didn’t
feel drawn to becoming an artist
herself. She had set her heart on a
professional career, and saw herself
in a smart suit, making big strides
in the world of commerce.
So in the end she chose to study
accountancy, choosing it as a solid
base for working in a variety of different professional fields – but she
vowed never to forget her love for
art and music.
Florence worked hard at university and won a place at the Hong
Kong offices of Arthur Andersen,
one of the world’s biggest accounting houses at the time. And from
there, she took a familiar path.
After getting a few years’ experience in professional practice, she
took the big leap into the commercial world. In 2004, she became
the financial controller for Asia for
RMJM Group, one of the world’s
biggest international architecture
firms at that time.
56 January 2016
Of course it was exciting to
work as a key member of a business team, but there was something
else that made her new role special:
she was once again surrounded by
super-creative individuals, people
for whom the visual arts were really
important. It felt right.
Life was good – and became
even better when she made two
“major creative productions” of her
own: she had a baby girl, followed
two years later by a boy. That was
a signal to take a break from work
and become a full-time mother.
But her special skill of being
a successful financial controller
for a creative team meant that
she could not hide her talents
permanently. Later, former
RMJM colleagues contacted her
to become a founder member
of 10 Design, an independent
architectural design firm, branded
simply as 10.
“This was a new start-up,” she
said. “However, the depth of the
knowledge and experience of these
founders was enormously rich.”
Starting a creative design
business from scratch was a
challenge. But the venture has
been a solid success: 10 now has
studios in Hong Kong, Shanghai,
Edinburgh and Dubai, with more
than 130 architects and designers
on its books.
“I’m really lucky to be able to
find a perfect match between work
and passion, being surrounded by
innovative and award-winning
designs at my workplace,” she said.
Thankfully, the ethos of the
team at 10 is to respect members’
work-life balance. That means
that despite the company’s steady
expansion, Florence gets time to
spend with her children, who are
now eight and six, and go to concerts and shows with her husband,
who also loves culture.
And she also can indulge her
own artistic abilities, singing in
choirs, which perform regularly in
Hong Kong and the Mainland.
Recently, Florence travelled to
one of her father’s painting exhibitions in China and met some of
his students. She was intrigued
to learn that some of them were
retired partners from Big Four
accounting firms in Hong Kong.
It seemed that after a long career
steering the flow of finance, they
wanted to focus on something a
little more holistic.
It could be that they instinctively recognized what another
professional-turned-artist, the
lawyer Louis Nizer, once said:
“He who works with his hands is
a labourer. He who works with his
hands and his head is a craftsman.
He who works with his hands and
his head and his heart is an artist.”
Nury Vittachi
is a bestselling author,
columnist, lecturer
and TV host. He wrote
three storybooks for
the Institute, May
Moon and the Secrets
of the CPAs, May Moon
Rescues the World
Economy and May
Moon’s Book
of Choices