BREAKINGVIEWS-Hong Kong’s top corporate gadfly leaves huge void

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Updates to add graphics.

By Hudson Lockett

HONG KONG, Jan 14 (Reuters Breakingviews) - David Webb leaves big shoes to fill, but that he fit into them himself is striking. Hong Kong’s foremost corporate gadfly died on Tuesday of metastatic prostate cancer at age 60, according to his social media accounts. He had for decades effectively served as the city's one-man shareholder association. Yet the fact that he felt compelled to rail against poor governance practically up to the end underscores the difficulty any lone agitator faces in tackling the financial hub's systemic issues.

Webb made a name for himself calling out poor governance at listed companies and demanding better protections for ordinary investors, all while maintaining an online corporate database relied upon by financiers and journalists alike. Along the way he racked up a string of wins, forcing greater transparency in shareholder votes, pressuring regulators to enforce basic disclosure requirements, and triggering a $6 billion sell-off by exposing a 50-member tangle of shadowy Hong Kong listings he'd dubbed the “Enigma Network”. The former banker also became a thorn in the side of local tycoons used to getting their way, such as when he scotched Richard Li's buyout bid for PCCW 0008.HK by alerting regulators to allegations of vote-rigging.

Perhaps his greatest public contribution was repeated excoriation of the city’s costly and uncompetitive public pension plan — the Mandatory Provident Fund, or “Mandatory Payment of Fees” in his phrasing — which helped lower costs and spur greater investment choice for every contributor in the city.

But there were clear limits to what Webb could achieve. That was underscored by his resignation in 2008 from the board of Hong Kong Exchanges and Clearing 0388.HK, where he argued policy was “increasingly being driven through the backdoor by inexperienced and inexpert officials rather than by an independent board in the best interests of the market". His drive for better governance also ran counter to a broader turn in Hong Kong against the short-sellers and institutional forces that can give such demands some material bite. This was exemplified by the securities regulator’s decision in 2014 to target Citron Research’s Andrew Left for his attack on now-infamous developer China Evergrande, whose implosion years later cascaded into an industry-wide insolvency.

Hong Kong’s market fundamentals also make governance campaigns harder, thanks to the Chinese companies that account for the lion’s share of market value and which are chiefly policed on the mainland at the discretion of Beijing. The national security law imposed in 2020 has further cowed critics, a trend Webb decried. And his passing throws into sharper relief the absence of any shareholder association in Hong Kong, a key contributing factor in the Asian Corporate Governance Association’s low ranking for the city.

Webb himself proved the relevance of governance to stock picking, with outsize returns through investing in well-run companies he'd pegged as undervalued. But market oversight requires both carrot and stick, without which any broader push for greater corporate accountability in Hong Kong will remain an uphill battle — as its patron saint of governance well knew.

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CONTEXT NEWS

Hong Kong activist investor and commentator David Webb died on January 13 of metastatic prostate cancer, according to his social media accounts.

(Editing by Antony Currie; Production by Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on LOCKETT/ hudson.lockett@thomsonreuters.com))