On the evening of 20 October 2008, Citic Pacific, the Hong Kong arm of the CITIC Group, China's largest state-owned investment company, stunned the stock markets by announcing that it would lose as much as HK$15.5 billion (approximately US$2 billion).
In an apologetic statement to the people, Larry Yung Chi-kin, the chairman of Citic Pacific, recognized the losses and confessed the contracts hadn't been properly authorized. Analysts and investors afterwards attacked Citic Pacific for its corporate governance and internal control practices. They expressed shock that the business would make such transactions that were high-risk and that it would delay the disclosure of these large prospective losses for six weeks. What does this occurrence say about the internal risk administration and its board of directors, especially the independent managers of Citic Pacific? Has the company demonstrated successful corporate governance standards and mechanisms through alignment of its top level managers' decisions with the interests of the shareholders?
PUBLICATION DATE: June 18, 2009 PRODUCT #: HKU841-PDF-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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