Abstract

This case is one of a series of cases that examines corporate governance in Hong Kong using the financial crises of 2008 that engulfed CITIC Pacific (now CITIC Limited) as the study. The first case dealt with the mechanics of the foreign exchange hedging which caused considerable losses at the company. The present case examines the governance structures at the start of the crisis, and how such structures have changed up to the present. There has been considerable change of the leadership at CITIC and new financial governance committee structures have been formed in order to manage risk. The case poses the question of whether such changes will prevent future challenges  when operational and financial risks arise from cross-border activities. Finally, the case considers the role of the regulatory bodies that formulate the rules by which such companies have to operate. The case considers whether the standards that govern the activities of companies in an industry are adhered to or are viewed merely as guidelines since all the competitors are pursuing the same activity.

Learning Objectives

1. 1. Describe the problems of corporate governance revealed by the crisis at CITIC.
2. 2. Understand how those problems occurred.
3. 3. Describe the changes in corporate governance that subsequently took place at CITIC.
4. 4. Explain the changes in regulatory provisions after the events in the case.
5. 5. Consider whether in a similar crisis the company would deal with events in a different way.
6. 6. Compare internal corporate governance mechanisms with modern regulatory requirements.