Following the international trend in education towards democracy and decentralization, the Hong Kong government introduced a school-based management (SBM) system about two decades ago. It is widely recognized in the literature that decentralization, empowering school level management and marginalizing the influence of the intermediate level of governance, can result in better deployment of school resources and better meet the demands of various stakeholders. However, in the unique historical and cultural context of Hong Kong, the advantages of decentralization claimed in the literature have yet to be fully realized. This paper discusses the contextual factors affecting the implementation of SBM in Hong Kong, and examines their impact on four major stakeholders, namely the government, the principals, the teachers, and the parents in the wake of reform.