* Appointment of younger Kwoks won't change much-activist
* New deputy MDs could act as mentors to Kwok sons
* Corporate governance response inadequate-association
By Alex Frew McMillan
HONG KONG, July 16 (Reuters) - Sun Hung Kai Properties tapped two family members as the long-awaited "Plan B" for the company's top management after Hong Kong's anti-corruption agency on Friday charged its co-chairmen in a HK$34 million ($4.4 million) bribery scandal.
Co-chairmen Thomas and Raymond Kwok, Hong Kong's second-richest men after Li Ka-shing, elevated two of their sons as stand-in directors of the world's second-largest developer and promoted two other executives to support the chairmen while they defend themselves against the charges.
By looking within itself for executive answers, the company tried to signal its long-term succession plans, but at the same time opened itself to criticism that the family dynasty is unlikely to bring in top-ranking outside expertise.
"I think their overall response to this crisis from a corporate governance point of view is generally inadequate," said Jamie Allen, secretary general of the Asian Corporate Governance Association.
By staying on despite the case against them, the brothers "may not be breaching their fiduciary duty to the company, but certainly their duty of care that means you're supposed to be diligent and fully professional in the work you do as a director."
The two sons, Edward Kwok, 31, and Adam Kwok, 29, have Ivy League educations and both have worked in investment banking at Morgan Stanley. Adam worked at Morgan Stanley from 2005 to 2008 in New York and Hong Kong while Edward did a research internship in Hong Kong in 2003.
The two have rarely featured in Hong Kong's social scene or in its tabloid press. Edward, Raymond Kwok's eldest son, graduated from Yale and worked as an accountant before joining the developer in 2010. Adam Kwok is Thomas Kwok's only son and graduated from Yale and from Harvard with an MBA. He took a post at the family business in 2008.
Hong Kong-based shareholder activist David Webb sees the executive changes announced Friday as window dressing.
"Putting the sons in as alternate directors doesn't do much, nor does changing the titles of two other directors," Webb said in an email. "It has always been a family-controlled company and the big decisions will still be made by the family."
The promotion of Mike Wong, a surveyor who heads project planning, and promotion of Victor Lui, the executive in charge of sales, to deputy managing director indicates that they are likely to act as "regents" until the younger Kwoks are ready to run the company.
"Adam and Edward need to grow into the job before they can be given full responsibility," former senior Sun Hung Kai employee Roger Nissim said. "Mike Wong and Victor Lui would be excellent mentors for them."
Nissim, who stepped down as manager of project planning in 2007, saw both younger Kwoks rotate through different departments during summer internships from college. Adam asked the right kind of questions and seemed smart, he recalled.
At $32 billion, Sun Hung Kai Properties ranks behind only U.S. shopping mall developer Simon Property Group 's $48 billion market cap. Despite the inexperience of the younger generation of Kwoks, they are expected to take the helm with help from the company's strong middle management rather than the company seeking a high-ranking external hire.
"It's a family run company, you can't escape that, and I don't see that really happening," Nissim said.
To Alfred Lau, a property analyst with Bocom International, Thomas and Raymond would only give up their roles if convicted of the charges, with a legal battle of seven years expected. Their sons are kings in waiting but will have to wait for coronation, he said.
"Naturally, we think these will be the two guys in the future, but what we have in mind is not the very near future," Lau said. "Unless it turns out in October both of the chairmen are behind bars."
Sun Hung Kai's response to the bribery investigation by Hong Kong's Independent Commission Against Corruption (ICAC) has been to wall itself off. Staff members are required to surrender mobile phones ahead of meetings to prevent surreptitious recordings. All communications related to the family need to be cleared by the Kwoks' legal teams, according to a source who works with the company.
That fits with the low-profile nature of the Kwok family. They protect the privacy of the third generation of Kwoks carefully, to allow the children, either college students or recent graduates, to follow their own direction and in response to the kidnapping of elder brother Walter Kwok in 1997.
The developer's shares have underperformed other Hong Kong property stocks by around 15 percent, compared to the Hang Seng index, since the chairmen were arrested on March 29. The shares resumed trading on Monday and were down 1 percent.