'Asianisation' of Australian Boards

Oct 2015

As the world contemplates the arrival and impact of the ‘Asian Century,’ leading Australian companies are already positioning themselves to best reap the benefits of economic opportunity in Asia.

In this case, proximity offers a powerful economic edge to Australian corporations when compared to businesses located in other global regions. More than three-quarters of Australia’s exports go to Asia, with China, Japan, and South Korea figuring among Australia’s five most active trading partners. With some economists projecting that Asia will represent 39% of the world’s GDP by the year 2030, these are trading relationships that could deliver generous rewards. So it should come as no surprise that most members of the ASX 200 see Asia as a key source of growth over the next decade, and beyond. This is prompting leading Australian organisations to reconsider the composition of their boards of directors. The business advantage offered by having appropriate board representation of key regional markets applies to any company investing outside of its home markets.

Quite simply, a board cannot properly meet its responsibility to review and develop business strategy without expertise in the relevant regions.

And yet, historically, Australian companies have been relatively slow to break through the so-called “bamboo ceiling” and add individuals with Asian cultural knowledge and expertise to their corporate boards. Fewer than 4% of ASX 100 directors and 6% of ASX 200 directors are of Asian descent.

The Inflexion Point

That situation is now changing. A recent survey by the Australian Institute of Company Directors indicates that 21% of boards are now seeking to increase the ethnic diversity of the board. Given the compelling business logic behind these moves, change could come swiftly. Consider that when Australian boards committed to adding female leadership, the percentage of female directors on ASX 200 boards doubled in four years, from 8.6% in 2010 to 17.6% in 2014. With many of the same factors now in play, the move by Australian boards to add leaders of Asian cultural heritage could happen on a similarly quick timetable.

The trailblazers are already distinguishing themselves. There are less than 30 Asian-born directors on ASX 100 boards currently, including 10 born in Singapore and 10 born in China or Hong Kong.

Among the forward-thinking companies that have added such leaders are Telstra, Ansell, Fortescue Metals, News Corp., Santos, and SP Ausnet (with three Asian directors). These numbers do not include leaders with Asian business experience that were born outside of the region.

Female Trailblazers

At the same time, some successful female NEDs are bringing Asian insight and key areas of expertise to Australian boards. For example, Eva Cheng, who led Amway Corporation’s 1991 market launch in China, was elected to the board of Amcor in 2014. With deep expertise across Greater China and Southeast Asia, Mrs Cheng brings deep expert. She also serves as NED for Trinity Ltd., Nestle S.A., Haier Electronics Group Company Ltd., and The Link Management Ltd. Margaret Leung, former CEO of Hang Seng Bank Ltd., was appointed to the QBE board in 2013. She also serves as director for China Construction Bank Corp., Chong Hing Bank, Hong Kong Exchanges and Clearing Ltd., Sun Hung Kai Properties, Li & Fund Ltd., and First Pacific Company Ltd. Additionally, Annie Lo, the former CFO of Johnson & Johnson’s worldwide consumer and personal care group, joined the Ansell board in 2013.

Cultural Differences Abound

And yet, despite the evidence of trailblazers and trend leaders, companies seeking to add Asian expertise in the boardroom will not find a pool of such leaders that is particularly broad or deep. A couple of factors contribute to this shortage of well-suited board leaders with significant Asian experience. For one, Western and Asian companies tend to operate with different governance systems and norms. Additionally, those executives whose experience has been centered at the many private, family, or state-owned enterprises in Asia may not prove to have the right cultural fit for a Western company board. 

At Johnson, we respond to this talent landscape by partnering with clients to develop a broader pool of board-eligible executives. Beyond the Asian executives with multinational experience, board candidates can include Western executives who have had significant tenures in Asia as well as Asian executives currently living and working abroad.

Meanwhile, it’s worth emphasizing that a board chock-full of CEOs does not necessarily best serve a company. Instead, a careful consideration of corporate and board goals is required, as well as an assessment of the key attributes and capabilities sought in a director.

Value of Advisory Boards

Another strategy for bringing Asian cultural and business expertise to a company is to establish an advisory board. Typically focused on business development matters, advisory boards can provide connectivity and insight to targeted Asian countries or regions. That is true even while advisory board members may possess slightly less business experience than their corporate board peers. The key credential for an advisory board member is the ability to help the business grow, including by sharing professional networks and by offering guidance regarding navigating political systems, engaging with key stakeholders, and fostering expansion into new markets.

The message to Australian companies is clear: Your competitors are getting serious about seizing economic opportunity in Asia by adding insightful and connected Asian leaders to their corporate boards and advisory boards. Will your company do the same?