The Non Governmental Organization (NGO) sector in Hong Kong has always been prevalent and strong, accounting for a large number of both, local and international organizations filling up the private sector landscape in Hong Kong. The growth of NGOs began with initial christian missionary groups and church groups. However, as organizations and business are seeking to fit their organizations into sustainability models, this poses an interesting discussion point for NGOs in terms of their corporate governance mechanisms and what burden they face in terms of good governance practices as opposed to general corporate business models.Although corporate governance compliance requirements take a different context based on the local principles, generally good governance seeks to uphold the interests of minority shareholders and public interest.
With the establishment of The Cadbury Report in the UK, came the ‘comply or explain’ approach which gives a comprehensive guideline for profit making businesses and NGOs alike. Hong Kong currently follows a simple comply policy, with a narrow scope in terms of the governance which is featured in the their respective annual reports. This leaves many NGOs in a precarious positions, where they are restricted in terms of flexibility among their governance practices, unsure of what is expected to reach a more sustainable business model and better governance within the organization, making it difficult to improve.
However, beyond the compliance standards, in practice, how much does good governance affect the running of a dail NGO? The answer can be quite challenging as NGOs primarily seek to carry out a mission which serves public interest as opposed to profit maximization for its shareholders. Therefore their corporate governance principles will matter more because their services directly impact the well being of society. In an interview with potential NGO investors, it was revealed that the main factor considered were their level of public trust, good reputation and a high level of transparency in order to donate to an NGO. This is a very crucial factor for the organization as NGOs primarily rely on outside contribution for the daily running of their organization.
Maintaining a high level of transparency is very hard in an organization where people assume voluntary roles rather than being an appointed shareholder. Therefore the private sector will better benefit for themselves if they have clear governance practices. NGOs pose a unique case and should start to pay more attention to their governance practices as it is crucial to the sustaining and running of their organization. Although the burden may be very heavy for them, in the long term it will be the key to attracting donors and gaining public trust.
