Paper Title
EFFECTIVENESS OF INDEPENDENT DIRECTORS IN HONG KONG GOVERNANCE

Abstract
Promoting theindependence of the board as a measure to improve corporate governance is a prevalent topic in the modern business world. In Hong Kong, the regulators have been continuously introducing reforms to enhance on this aspect.Prior researches show that corporate governance actually plays a vital role for investors’ decisions. The use of independent directors inthe board to monitor the corporate governance of a company is of paramount importance to our governance mechanism. Independent directors are outside directors unrelated with the business or its shareholders. In Hong Kong,the introduction of independent directors in the form of Independent Non-executive Directors (INEDs) to serve in the board are specified in the Main Board Listing Rules (“the Listing Rules”). The Listing Rules of Hong Kong requires all listed companies to appoint at least three INEDs and requires the proportion of INEDs to be at least one-third. Besides, at least one of the INEDs needs to have professional background in accounting and financial reporting. Thepaper focuses oninvestigatingHong Kong due to its unique institutional environment of family ownership and control. The effectiveness of INEDs might be in doubt due to the strong control of the company by the controlling family.Therequirement which emphasizes the number or ratio of the INEDs in corporate boards may harm the effectiveness of INEDs,or overlook the other important aspects such as whether the INEDs are genuinely independent, or their time commitment or professional qualifications to bring in any real difference. This paper introduces the background for the laws and regulationswith regard toindependent directors,reviews the relevant literature in these areasand benchmarksthe practice with those of other jurisdictions such asthe People’s Republic of China, the United Kingdom, and the United States. Moreover, the article analyses the implementation challenges and hindrance faced by the companies or regulators in the board independenceregime given the system has been in place for a number of years and make recommendations to any future direction in this governance aspect. Keywords - Corporate Governance, Independent Directors, Listing Rules, Hong Kong