JULY 3, 2000  

David M. Webb

Founder -- webb-site.com -- Hong Kong

For years, David M. Webb was just another habitual letter-to-the-editor writer. He observed local goings-on and dashed off critical missives to newspapers--first in Britain, where he grew up, and then in Hong Kong, where he has lived since being sent out from London as an investment banker with BZW in 1991. But thanks to the Internet, Webb now has a powerful new venue: webb-site.com. With it he has become a lonely voice of criticism in a city of opaque business practices and lackluster disclosure laws. ''The aim is to stop the rot in corporate governance,'' says Webb, 34.

Two years ago, Webb retired to manage his own stock portfolio. In the process of investigating companies to invest in, he came across all kinds of suspicious behavior behind the closed doors of corporate Hong Kong. A self-described ''computer geek,'' he now posts his findings on the site, providing a much-needed pro bono service to the public seeking information about publicly traded companies.

Webb, who studied mathematics at Oxford University and heads Hong Kong's Mensa chapter, keeps a bedroom full of meticulous files on Hong Kong companies' doings. He considers his muckraking critical to improving Hong Kong's market transparency. ''I say, 'O.K., you want to be a world-class financial center, let's see some disclosure,''' he says. The exposure is working: Webb's drumbeat against improprieties on Hong Kong's second board has put pressure on it to tighten listing loopholes.

A Chat with David M. Webb

When investment banker David M. Webb, 34, retired two years ago to manage his own portfolio, he uncovered corporate-governance issues and alleged improprieties in a slather of Hong Kong-listed companies. He posted his findings on the Web -- and hiked the pressure on Hong Kong to tighten standards. Webb recenlty met with Asia Editor Sheri Prasso at his home office in Hong Kong. Here are edited excerpts of their conversation:

Q: What is the purpose of [your] webb-site.com?
The main aim is to stop the rot in corporate governance. I'm a permanent resident of Hong Kong, and I spend the bulk of my time investing in the small-cap market. In Hong Kong, 600 companies make up 10% of the market value, and only 100 companies make up 90%. The top 50 of those are well researched. There's very little research on the rest. I spend my time searching through these companies, and in the course of that you do find some overlooked companies. You find some horrendously overvalued companies. In the process of screening those companies you get these really bad corporate-governance horror stories.

Also, there's the issue of transparency and disclosure. Hong Kong is one of the best in Asia, but that doesn't say very much. Companies are [required to publish] only two reports a year. It takes three months to come out, and there is no profit/loss statement. There are no quarterlies...and this is in a city that aspires to be a world-class financial center. I say, "O.K., you want to be a world-class financial center, let's see some disclosure.'' I try to spend only one day a week on it [webb-site.com]. Most of the rest of my time goes into researching.

Q: Do you benefit financially from your activities?
It doesn't pay back in my own portfolio. You can only outperform if the drag factor from corporate governance isn't too high. It's a virtuous circle for the markets: Better corporate governance will attract more investors. I don't want to be portrayed as a saint or anything, but I don't mind shaking the trees in order to improve standards generally.

Q: What kind of feedback do you get?
One quarter of the market cap of Hong Kong is controlled by one family [Li], and [any investment analysts who report their concerns] potentially risk losing a quarter of their business. In the brokerage community I get a lot of support. People are glad I'm saying something.... We still have this bump in the playing field. The people behind [questionable activities] have a kind of godlike status in Hong Kong.

Q: How did you begin webb-site.com?
I've always been a habitual letter writer to newspapers. When it became clear that you no longer needed a newspaper to express an opinion, [I launched the site]. The first piece I put up was on dollarization of the Hong Kong dollar, a speech I had made to the American Chamber of Commerce.

Q: Why did you retire from investment banking?
I had been doing it for eight years. I thought Wheelock (where Webb served an in-house financial adviser after leaving BZW in Hong Kong) would be a thinker's job, thinking longer term about corporate investments. I made the complete transition to how companies think and act.

Q: How did you have enough money to retire so young?
I had some royalties from books and [computer] games [developed when Webb was a teenage freelance computer programmer]. I started investing those royalties in the stock market in college.

Q: Is this a new career or a hiatus from investment banking? Would you ever go back?
I'm not sure if anyone would take me now. I'm too dangerous!