Forecast: Sunshine with disinfectant

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Hong Kong, long renowned for its clean government, has been rocked time and time again by a range of major and mini scandals involving our public figures. It the words of Marvin Gaye: “What’s Going On”?!  HT seeks the ultimate guardians of virtue in the public sphere


In 1992, a black unmarked car pulled up in front of a suburban Vancouver household where a man was mowing his lawn.  Two dark-suited men in sunglasses emerged and approached the man who shut off his lawnmower and watched them moving purposefully towards him.  One of them reached into his jacket and pulled out…a badge.  “Sir, we’re from the RCMP (Royal Canadian Mounted Police).   We’d like to ask you some questions about Mr. Work.  Mr. Andrew Work.”

Mr. Work was 19 years old at the time and had been accepted to work in Ottawa for a Cabinet Minister for his summer job.  The man with the lawnmower was his neighbour while in high school, over 4,300km away.  Given the work was on Parliament Hill, a police check, including non-referred background interviews, were standard operating procedure.  This was vetting for a 19 year old who would lack the power to order so much as a box of paperclips.

In Hong Kong, a range of conflict of interest scandals have arisen that make one wonder how such scandals could have arisen in the first place if people only used common sense and some basic background checking.  Much has been made of the system of checks and their failures.  Harbour Times undertakes the Herculean task of cleaning out the Augean stables of ink spilled about new and old conflict rules in Hong Kong.

Conflict of Interest

Conflict of interest can arise even when there is no wrongdoing.  A conflict may arise accidentally and is a precondition to wrongdoing – not the wrongdoing itself.  Our  judiciary has its own means of resolving these issues before they become a problem: judges having an option to recuse (exempt) themselves from a court case should they find they may have a potential conflict of interest.  In Hong Kong politics and civil service, like many places, declarations of interest are intended to see off conflicts before they arise.  But recently they seem to be happening with disturbing regularity.

First, there is no one system in Hong Kong. There are a range of systems to manage:

  • Civil Servants
  • Politically Appointed Officers (PAOs).
  • Executive Council (ExCo) members
  • The Chief Executive (CE)
  • Legislative Council (LegCo) members.

ARE YOU A PAO?

Politically Appointed Officials are governed by ‘the Code’: Chapter 5 of the Code for Officials under the Political

Appointment System.  Famous PAOs have included Henry Ho and Anthony Leung. Under paragraph 5.12 of the Code, PAOs are:

(a) Secretaries of Department;

(b) Directors of Bureau;

(c) Director of the Chief Executive’s Office;

(d) Deputy Directors of Bureau; and

(e) Political Assistants


All these systems have their own rules, regulations and procedures.  Quite independent of this are political parties that have their own means for vetting candidates who represent them. Statutory bodies, like the ICAC, have their own rules and regulations.

There are two major categories of means of monitoring our public figures:  Declaration and vetting.

I declare…

Declarations are a major part of the system whereby politicians and government officials bare their souls, assets, affiliations, family connections and, sometimes, political affiliations.  While Civil Servants, the CE, ExCo and PAOs have Open Declarations (open to the public) and Confidential Declarations (not open to the public), all LegCo member declarations are open to the public.

LegCo declarations are different in other ways.  While they do have to declare lands and property, their principal residence is exempted.  Spousal holdings are not required to be disclosed, unless the holdings are held “with and on behalf” of the spouse .  Election donations must be disclosed.

Another important distinction among Open Declarations is that PAO’s must, in addition to following the same rules as civil servants for Open Declarations, also declare their ‘political parties affiliations’.  The ExCo members must declare ‘organization/board/committee membership’.

All LegCo member declarations are open to the public.

The Confidential declarations are only accessible to the ExCo Secretariat within the CE’s office (given the CE is the President of ExCo).  Bodies including LegCo’s Powers and Privileges Committee and the ICAC can access these documents if needs be.  Confidential declarations normally deal with investments, directorships, and spousal details.  Most information in the confidential declaration is more detailed about items in the public declaration.  For example, public records only show shareholdings of over 1% of a company but the confidential shareholding details on all shareholdings.

Declarations of gifts and advantages are included in this system, ranging from civil servants requests for permission (kept confidential) to the Chief Executive’s $400 limit (gift givers take note) for declaring gifts.  ExCo members must declare support for overseas visits, or gifts, worth more than $2,000.

The declaration system also demands declarations of changes of regulated holdings and relationships within a certain timeframe after the fact.  This applies to ‘gifts, advantages, etc’.  This aspect recently came to light when it was revealed that LegCo members traveling to Paris at Cathay Pacific’s expense dutifully and correctly filed within the 14 day period after the trip.

The system for civil servants was largely adopted for PAOs and ExCo (including the CE) with declarations modified over the years as part of reviews.

… but we’re checking, just in case.

Vetting is the second part and applies in different ways to various groups described.  There is no vetting, police or otherwise, of LegCo members.  ExCo,  and PAOs are subjected to police checks into their backgrounds.

Professor Ma Ngok (馬嶽), Associate Professor from the Department of Government and Public Administration of CUHK, spoke to HT’s Calvin Lam and explained this stemmed from the era of the birth of the ICAC in the 1970’s.  LegCo was a mostly powerless advisory body and the civil service was the source of real power.  The focus was on making sure the civil service got cleaned up and so a much stricter, more rigorous system was implemented earlier – and then strengthened over the years.  Its cohort ultimately reported to the Governor, seen as an impartial guarantor of virtue.  After the handover, that system continued with the CE as the final word on sanctions.

But really, it’s all voluntary

One thing that strikes an observer of all these systems is the huge reliance on a grand honour system.  Declarations are voluntary.  While rules and regulations for declarations are quite detailed, including extended questionnaires and referees, there is little investigation outside of what people choose to disclose.   Obviously no one would put down their former crack dealer as a referee nor their holdings of illegal properties, self-occupied or rented, and problems arise.

Professor Ma thought this a major weakness of the system.  He explained that first we assume the officials to be honest – but the government has no means to detect any possible conflict of interest if an official did not declare it. In the absence of an inspection or investigation system, these potential conflicts of interest are undetectable. Second, the lack of such system has little deterrent effect on those who decide to cheat.

There is very little in the way of a due diligence report, such as any commercial venture might undertake when signing a major contract or making an investment.   Whether by deliberate or honest omission, the system seems to be missing a level of scrutiny that, if introduced, could help avoid much embarrassment by identifying conflicts of interest before they became a problem.  Simple background checks by professional firms, using public information, are not costly and identify sources of grief like past bankruptcies and directorships an appointee may have forgotten to disclose.  It was even cheaper and faster, if potentially less accurate, until due diligence app Do No Evil was shut down (see Harbour Times Issue 7.  Two stories: cover story Did No Evil and p. 9 A Bridge too far) Political parties may be interested to vet their candidates for district councilor and LegCo using these tools, if only for their own peace of mind.  Such checks are a standard starting point in political parties in other parliamentary democracies.

Reform!

Dissatisfaction with the system led to the recommendation of a review of regulations and a review occurred.  The Independent Review Committee Report, headed by former Chief Justice Andrew Li Kwok-nang (李國能) was submitted in May 2012 and was exhaustive in its recommendations.   It identified the system governing civil servant to be robust and effective, requiring no major modifications.  Indeed, the cases involving civil servants have been unique in their details and complexity (e.g. trading flats through spouses for rental and allowances)  and are more about abuse of expenses than conflict of interest.  These types of abuses are common – and commonly detested by the public – in even well regarded parliamentary systems like Canada (Senators) and the UK (MPs).  In all cases, digging by media and taxpayer watchdog groups have used public reporting systems to effectively reveal wrongdoing.

The report did recommend over 36 changes ranging from how PAO potential conflicts should be handled by the CE’s office to further reviews every five years to reflect changing mores in society (and, presumably, account for inflation in setting thresholds for gift reporting).

More than a year later, Chief Executive’s office quietly posted the new ‘Guidelines for the Chief Executive in Handling Potential Cases of Conflict of Interest and Acceptance of Advantages and Entertainment Concerning Politically Appointed Officials’.  Prompted by the governments’ handling of the former CE, Donald Tsang’s case, it was criticised once revealed.  Newspapers, Hong Kong Journalists Association and political parties all took issue with the quiet manner in which it was released, its lack of requirement to declare debt (in the wake of the Barry Cheung/HKMEx debacle), its broad and ambiguous definition of ‘friends’, and the continued reliance on the Chief Executive as the sole and final control on information and sanctions.  It also avoided mention of IRC recommendations like the establishment of an Independent Committee to decide on permissions for accepting gifts by the CE.

Let the sunshine in

“Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”

Not a fan of light pollution controls, Justice Louis D. Brandeis coined this phrase about sunlight in Harper’s Weekly 100 years ago this year.  Is it true for Hong Kong?

When it comes to LegCo, probably yes.   Kenneth Chen, a former PAO himself and now Secretary General of the Legislative Council, thinks the system is working as it was designed to.  It does reveal the goings-on of Legislators.  He highlights for HT the difference between LegCo members and the other monitored classes.

“The legislative setting is different to the Executive setting.” Kenneth Chen

PAOs and Civil Servants have an employee-employer relationship with the government. Legislators answer to the people – in all senses.  He observes that the legislators take their own monitoring seriously.  The Committee on Members’ Interests  deals with “complaints made in relation to Members’ registration and declaration of interests and their conduct concerning claims for the reimbursement of operating expenses or applications for an advance of operating funds.”  They had reforms under consideration until the proroguing of the last legislative term.  Look for them to be discussed in October/November when LegCo is back in session.

When ‘will of the people’ meets ‘conflict of interest’

He notes the sanctions for erring LegCo members are decided on by their peers.   The will of the people who elect the LegCo members can only be superseded by, in effect, more will of the people.  He emphasised that removing an elected member, anywhere in the world, was a serious matter.  “Firing a legislator – it has to go through certain procedures.”

The real police of LegCo then, if declarations are thorough, are the people of Hong Kong through the media.  The job of a politician is to know the will of the people.   When they correctly read that mood and respond, they are rewarded with our trust.  When they fail, they suffer.  The public’s will, their sense of what is acceptable and what is not, is a moving target.

The recent trip to France by legislators is a prime example.  While trips were taken by their predecessors, and duly declared to no ill effect, the public mood has shifted.  Perhaps driven by LegCo’s intense criticism of other public officials  such as the former CE Donald Tsang and ExCo members, the public’s threshold for public officials’ acceptance of largesse has dropped to almost zero.  Hoist on their own petard, legislators who gleefully posed for pictures in Europe were surprised to find a frosty reception at home.  They shouldn’t have been.

They will be beholden to their parties who now must try to salvage reputation by being seen to sanction their erring members.  Parties are now looking to renew their internal codes of conduct to avoid similar disasters in the future.  While the 2012 IRC report recommended the government review rules every five years for PAOs and civil servants, political parties would be well advised to revisit their rules every six months and after every scandal – local and international.   After all, why not learn from the best and the worst?  Internal ethics commissioners and communicators within parties could keep legislators on their toes.  The Secretary General plays a role by publicising current rules and regulations, but the public is a much scarier beast to answer to than even LegCo peers.

Recommendation 35: The IRC recommends that the system for the prevention and handling of potential conflicts of interests concerning the CE, ExCo Members and PAOs should be subject to review at least once every five years in the light of experience to ensure that it meets the expectations of the public in rapidly changing times.

Vetting: A little shade for PAOs, ExCo and the CE

For PAOs and ExCo members, it is a different story.  The buck stops with the Chief Executive who also controls  all information provided.  This fact has come under intense fire from all quarters when such information is not forthcoming.  The public is after some sunshine in this realm.

Requests from HT for clarification about vetting PAOs and ExCo members, put to the Civil Service Bureau,  resulted only in a polite vagueness about how and if any of the voluntary disclosures were actually checked by anyone.  They claimed confidentiality was “essential to uphold confidentiality of the relevant data and procedures of the checking.”  This was almost identical  to the answer Kenneth Leung received in LegCo on June 5th from Chief Secretary Carrie Lam.

Fortunately, an official from the CE’s office was able to answer our question at the 11th hour of HT going to print – the integrity checks do include police conducting basic checks on the veracity of submitted information.

Professor Ma felt that in other jurisdictions, the democratic mechanism, while not codified, was effective in removing Cabinet level officials from their post if conflict was found to have been used for advantage.  “You can interpret it as a  lack of [an informal] democratic regulation, so that the highest executive can be partial to his officials [in Hong Kong].  In the West, the concerned person will be sacked to save the ruling party in next election. Pressure will be built up within and outside the ruling party – but in Paul Chan’s case, only pressure in the public is experienced.” (from Cantonese).  In other words, Hong Kong lacks the internal party pressure to sack conflicted ministers as our ministers are not part of a party seeking reelection.  The system in Hong Kong is similar to other jurisdictions, just minus one element of pressure to resign.

Taming the alpha wolf

A huge amount of power resides in the Chief Executive for scrutinising and sanctioning PAO’s and ExCo members.  But the CE is not without checks.

In terms of disclosure, the Chief Executive makes his  declarations to the Chief Justice, who is appointed by…the CE, albeit at the recommendation of the Judicial Officers Recommendation Commission.  Who are all, of course, ultimately appointed by the CE (Section 3(1) of the Judicial Officers Recommendation Commission Ordinance, Chapter 92).

Similarly, criminal matters can be investigated by the ICAC.  However, given the head of the ICAC answers to the Chief Executive, this circular loop has been heavily criticised.  The ICAC conflict of interest issue has been treated extensively elsewhere and reforms proposed (see Harbour Times Issue 3 and 4 for the New South Wales ICAC reforms that could apply in Hong Kong).  But this circular loop needs to be broken for both the CE and the ICAC and new oversight brought in – possibly a LegCo Oversight Committee as in New South Wales.

LegCo has the two drastic options of the Powers and Privileges Committee or impeachment, should their collective ire be raised to sufficient levels.  Of course, as our first CE’s experience shows, a CE must watch his health, lest it be the cause of removal from office.  This suggests an even higher power still can check our mighty CE.

The guidelines gingerly revealed last month only deals with how the CE oversees the PAOs.  The CE’s oversight is not mentioned.  Given the outcry over the perception of former CE Donald Tsang’s potential conflicts, this omission will do nothing to satisfy a public hungry for sunshine in politics.

Enfin

Of the 5 major categories of public servants at the core of government, politicians and bureaucrats alike, different systems mean different levels of sophistication, effectiveness and acceptance by the public.

Probably the safest persons are those who have been subject to the strictest and broadest set of rules in their careers.  Career civil servants who rise to the top have been subject to the strongest and most intense scrutiny for decades.  People like Carrie Lam and John Tsang have lived a life under the microscope and then been subjected again to the vetting for PAOs once getting to top jobs.

Some ExCo members come in under the cover of the voluntary-only disclosure, and vetting based only on that  disclosure.  This raises the potential for more trouble.  After a lifetime outside of public scrutiny can result in often creative asset holdings and unusual allegiances so common in Hong Kong.  Add to that family (and now vaguely defined ‘friends’) with very private holdings (including spouses), those entering the system will no doubt slip in with time bombs waiting to blow, a la Paul Chan.

New guidelines proposed by the IRC report, if followed as per the recently released guidelines could improve the handling of PAO cases.  However, the CE’s situation poses the biggest challenge.  The CE has the most power, the most circular loops of reporting and sanction (via ICAC and the Chief Justice), and only the most drastic remedies exist to ensure the office is clean and deliver sanction.  In this case, perception is as important as reality.  The cleanest leader in the world will suffer if the  system around him or her is murky.  The public will not stand for it.

The Real Boss

LegCo’s approach,  reflecting the will of the people, seems to be the only sustainable approach.  Public standards can be capricious, unfair and subject to political fashion and frenzy.  An innocuous asset holding today may be an unacceptable conflict of interest tomorrow.  Who could have imagined illegal basement structures could dominate a political horse race, determining a city’s leader?

We desperately reach for a perfect set of rules to dictate what public officials can and cannot be, do, own, accept, support and believe.  However,  the ultimate judge in a free society like Hong Kong is the actively engaged public,  Judge Brandeis’s wisdom from 100 years ago must hold.  We must disinfect with sunshine.  Our civil service, since its colonial era reform, has matured into a body that wins global respect.  Our PAOs and ExCo members come into a system they aren’t familiar with and mistakes – often honest ones – are made.  And the CE’s office suffers from a public perception that its oversight and reporting desperately needs reform.

These challenges are not unknown to Hong Kong.  We dealt with rampant corruption in the past.  Hong Kong is currently ranked #14 globally in Transparency International’s Corruption Perceptions Index – hardly a poor showing.  Recent conflict of interest cases show where gaps remain and reform must come, but it is hardly a plague destroying our society.  However, perception matters and, left unaddressed, the issue could  become morale killers.  Vigorous reform, especially concerning the structures surrounding the CE’s office, must be constant and consistent.

Rules can be written and rewritten.  Politicians can declare and be vetted ad nauseum.  Ultimately, the bringers of the sunshine are the people of Hong Kong, through their eternal vigilance.  As long as our public officials judiciously apply the sunscreen of virtue, they shouldn’t get too burned.