Subvented organisations play a huge role in the delivery of public services in Hong Kong. They provide a wide spectrum of services, enhancing cultural life, improving health and education, and helping economic development to mention only a few. Some even help with the oversight of government itself.
Subvented organisations employ as many staff as the Government. They receive about 40% of annual recurrent public expenditure, though I note that many organisations are not wholly dependent on public funds, raising additional money from a variety of sources.
Many of you in the audience today sit on the board of one or more, sometimes many more, subvented organisations. Let me take this opportunity to thank you for the selfless commitment to community and public service that so many of you have demonstrated.
I am sure that many of you will have quickly realised that an invitation to sit on a board is not merely an honour, not just recognition of your expertise, experience and standing in the community, but an onerous task that carries real responsibilities.
Boards receiving public funds, employing dedicated staff and delivering essential public services have genuine responsibilities. They need to do the right thing by their staff, by end-users of the services, and by the Hong Kong taxpayers.
Corporate governance is a means by which organisations are held to account by their stakeholders. It started in the private sector, but it soon became apparent that the concept is equally applicable to the public sector.
All those overseeing expenditure of public funding must be accountable for the use of that money. This requires that sound accounting, budgeting and reporting systems must be put in place, and practised.
Responsible oversight
Second, the board of directors - by whatever title they are called - must be responsible and accountable for the actions of the organisations they control. Of course, part-time and unpaid directors cannot oversee every activity on a daily basis. But they have a duty to put in place a competent and reliable management team, and they must exercise responsible oversight.
Third, there is no one-size-fits-all solution. Hong Kong's subvented organisations vary enormously in size, budget, types of services, and so on. Each organisation needs to put in place a corporate governance regime that is appropriate to its circumstances. This should be agreed with the relevant oversight department. A timetable or roadmap should be drawn up to guide progress in implementing any necessary improvements.
I trust that the new Guide to Corporate Governance in Subvented Organisations will prove helpful to both subvented organisations and departments alike. It provides a handy reference of the key elements of good corporate governance practice, and puts them into the Hong Kong public service context.
The guide makes clear that every organisation needs to look at its own circumstances and objectives, and decide what is appropriate. Oversight departments can assist in this process. Essential corporate governance requirements should be included in the relevant funding agreements.
This is not a charter for departments to try to micro-manage their subvented organisations. Far from it. The responsibility for managing each and every subvented organisation lies with its board of directors.
Nonetheless, subvented organisations should ensure that sufficient, accurate and timely reports on objectives, performance, accounts and budgets are passed to their oversight departments.
Some organisations, the smaller ones in particular, may need help to improve their arrangements. The Government is considering how best to ensure that help is available, without interfering with the independence that gives subvented organisations their vitality and innovative character.
Secretary for Financial Services & the Treasury Prof KC Chan gave this address at a seminar on corporate governance for subvented organisations at the Jockey Club Auditorium at Hong Kong Polytechnic University.
