Corporate Governance Structure

Hang Seng is committed to maintaining and upholding high standards of corporate governance with a view to safeguarding the interests of shareholders, customers, employees and other stakeholders. The Bank has followed the module on “Corporate Governance of Locally Incorporated Authorised Institutions” under the Supervisory Policy Manual (SPM) issued by the Hong Kong Monetary Authority (HKMA). The Bank has also fully complied with all the code provisions and most of the recommended best practices set out in the Corporate Governance Code contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (Listing Rules), save that the Risk Committee (all the members of which are Independent Non-executive Directors (INED)), which was established pursuant to HKMA's SPM on corporate governance, is responsible for the oversight of internal control (other than internal control over financial reporting) and risk management systems. If there were no Risk Committee, these matters would be the responsibility of the Audit Committee, as provided under the aforesaid Corporate Governance Code. The Bank constantly reviews and enhances its corporate governance framework to ensure that it is in line with international and local corporate governance best practices. ^{Note A}

Board of Directors

The Board consists of 16 Directors, of whom three are Executive Directors and 13 are Non-executive Directors (NEDs). Among the 13 NEDs, nine are INEDs. Four of the 16 Directors are female.

There is a strong independent element on the Board to ensure the independence and objectivity of the Board's decision-making process as well as the thoroughness and impartiality of the Board's oversight of Hang Seng's Management.

Members of the Board, who come from a variety of different backgrounds, have a diverse range of business, banking and professional expertise. Both as individual Directors and collectively, the members of the Board possess appropriate experience, competencies and personal qualities, including professionalism and integrity, to discharge their responsibilities adequately and effectively. In addition, the Board collectively has adequate knowledge and expertise relevant to each of the material business activities that the Bank pursues, and their associated risks, in order to ensure effective governance and oversight.

The Bank uses a formal, considered and transparent procedure for the appointment of new Directors. Before a prospective Director's name is formally proposed, opinions of the existing Directors (including the INEDs) will be solicited. The proposed appointment will first be reviewed by the Nomination Committee, taking into account the balance of skills, and knowledge and experience on the Board. Upon recommendation of the Nomination Committee, the proposed appointment will then be reviewed and, if thought fit, approved by the Board after due deliberation. In accordance with the requirement under the Banking Ordinance, approval from HKMA will also be obtained. All new Directors are subject to election by shareholders of the Bank at the next Annual General Meeting (AGM) after their appointments have become effective. Further, the Bank's Articles of Association provide that all Directors shall be subject to retirement by rotation at least once every three years. Retiring Directors are eligible for re-election at AGMs of the Bank.

The Bank remains committed to meritocracy in the Boardroom, which requires a diverse and inclusive culture where Directors believe that their views are heard, their concerns are attended to and they serve in an environment where bias, discrimination and harassment on any matter are not tolerated. The Board has adopted a Board Diversity Policy, a copy of which is available on the Bank's website (www.hangseng.com), for better transparency and governance. Board appointments are based on merit and candidates are considered against objective criteria, having due regard for the benefits of diversity on the Board including, but not limited to, gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service.

Board Committees

The Board has set up five Committees, namely, the Executive Committee, the Audit Committee, the Risk Committee, the Remuneration Committee and the Nomination Committee to assist it in carrying out its responsibilities. Each of these Committees has specific written terms of reference which set out in detail their respective authorities and responsibilities. Each Committee reviews its terms of reference and effectiveness annually. The terms of reference of all the Non-executive Board Committees have been made available on the Bank's website (www.hangseng.com). ^{Note B}

All Committees adopt the same governance processes as far as possible as the Board and report back to the Board on their decisions or recommendations on a regular basis.

Hang Seng Bank (China) Limited - Corporate Governance Structure ^{Note C}
Hang Seng Bank (China) Limited (Hang Seng China) was established in 2007 and complies with all laws and regulations governing the set up and operation of mainland China subsidiaries of foreign banks.

Board of Directors
As at 31 December 2014, there were eight Directors on the Hang Seng China Board, including the Chairman, one Executive Director, who is also Vice-Chairman and Chief Executive of Hang Seng China, and six Non-executive Directors. Among the six Non-executive Directors, five are Independent Non-executive Directors.

Board Meetings
The Board held five meetings in 2014.

Board Reports to
Sole shareholder, Hang Seng Bank Limited.

Board Committees
As at 31 December 2014, the Board has set up five committees: the Executive Committee, the Audit Committee, the Risk Committee, the Connected Transactions Control Committee and the Remuneration Committee. Each committee has specific written terms of reference that set out its authorities, responsibilities and meeting rules.

Supervisor
Hang Seng China has one supervisor, nominated by and reporting to the shareholder, who is required to sit in on all Board meetings. Hang Seng China's supervisor sat in on all Board meetings in 2014.