Governance group questions role of Cathay bailout 'observers'

A local directors' group has expressed concerns about Hong Kong's plans to send two "observers" into the boardroom of Cathay Pacific Airways as part of a government-led $5.03b bailout of the carrier. "We are very concerned about the observers," said Roy W.K. Lo, deputy president of the Hong Kong Independent Non-Executive Director Association. "It is not good for observers to sit beside the board members. They shouldn't have any impact on the board. If they do, the whole corporate governance structure will collapse." Unlike most Asian flag carriers, Cathay Pacific has always been under private-sector control. The airline's unexpected HKD39b package, unveiled June 9, has led to questions about how much of a role the authorities now plan to take. Officials have insisted that the government will not be a long-term shareholder in the airline, though it will gain preference shares and rights convertible to a 6.08% stake in the airline's common stock. The government has said it is only intervening because of the extraordinary stress the aviation industry is under because of the coronavirus pandemic in order to preserve the city's role as an international transport hub. Finance Secretary Paul Chan Mo-po has said the Cathay observers are to "safeguard the interests of the government" by attending board meetings and voicing opinions without voting as the government does not intend to "interfere with the operation and management" of the company. He has said the representatives will be "seasoned, business professional leaders" rather than government officials.<br/>