Boards in China Need to be More Open as Chinese Economy Globalises
SHANGHAI, China, Oct. 18 /Xinhua-PRNewswire/ — Heidrick & Struggles
International, Inc. (Nasdaq: HSII), the world’s premier executive search
and leadership consulting firm, have announced key landmark findings from a study on Corporate Governance in China. Sponsored by Heidrick & Struggles and conducted with one of China’s world ranked universities, Fudan University in Shanghai, the study represents one of the most comprehensive studies on corporate governance in China to date.
In general, the study found that there is room for growth in corporate governance in China. Characterised by the cultural emphasis on local networks (guanxi), particularly with the government, boards in China tend to be tightly knit communities built on business or personal connections. Amongst the companies studied, 72% of board members were sourced through referrals.
“The study also shows that local enterprises tend to resist the
introduction of foreign directors to sit on their boards, even as China is increasingly part of the global economy. 48% of Chinese state-owned
enterprises and private enterprises would not consider employing foreign
directors. Only 26% will consider hiring foreign directors, amongst which, 69% expect to do so within three years,” said Steve Mulljiner, Managing Partner, Heidrick & Struggles China. “This mindset has to change, as China has yet to develop a pool of strong local talent with in-depth experience to bring Chinese companies into international markets. Chinese companies do not need to look too far to find Chinese-speaking professionals with years of international exposure and market knowledge. In fact, the research shows that the two of the top three preferred sources of foreign directors in the mainland are from neighbouring areas; that is Hong Kong (27%) and Taiwan
(19%), with America (15%) coming in third.”
“The unwillingness to recruit foreign directors indicates that the
internationalization level is low in Chinese enterprises,” said Professor
Lu Xiongwen, dean of the School of Management. “Chinese enterprises either don’t trust foreign directors or think it unnecessary to hire foreign talent. Some enterprises are afraid communication with foreign directors would be difficult due to cultural and language barriers.”
However, foreign invested enterprises have put the employment of
Chinese directors into their agenda as part of their localization strategy. More than 71% of foreign invested enterprises are considering the employment of Chinese directors, among which 87% plan to realize this
within three years. Only 30% of the foreign invested enterprises
interviewed do not intend to employ Chinese directors.
Note to Editors:
The points highlighted here represent partial key findings. Requests
for more data, information or recommendations from the study should be sent to Jennifer Tow, Manifesto Ltd, (852) 2526 1972 or
jennifer@manifesto.com.hk. Arrangements for exclusive interviews can be
made.
About Heidrick & Struggles International, Inc.
Heidrick & Struggles International, Inc. is the world’s premier
provider of senior-level executive search and leadership consulting
services, including talent management, board building, executive
on-boarding and M&A effectiveness. For more than 50 years we have focused
on quality service and built strong leadership teams through our
relationships with clients and individuals worldwide. Today, our leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. For more information about Heidrick & Struggles, please visit http://www.heidrick.com .
About School of Management, Fudan University
Strategically positioned in Shanghai, an emerging capital of national
economy, trading, finance and transportation, Fudan University can lay
claim to nearly one century of continuous existence. There is no clear date of the initiation of its business education, but teaching existed at Fudan in some form of management in 1917 and formally enrolled undergraduate class of Management Science in 1977.
About the Corporate Governance in China study
Sponsored by Heidrick & Struggles, this Corporate Governance in China
study is the result of 15 months of research, interviews, discussion and
consultation. The research is based on in-depth interviews with the
Chairmen or Presidents of 50 leading PRC and multi-national companies in
China. A total of 1,000 questionnaires were distributed, with over 100
returned. Questionnaire respondents included top-level board members and
executives. The Study covered various industries and different regions.
A strategic study that focused primary on the structure, function, and organization of the boards, as well as the roles of the board members and their relationships, this research is unprecedented in China, and internationally, and provides new and unique insight to corporate governance in China.
Media Contacts
Jennifer Tow
Manifesto Ltd
Tel: +852-2526-1972
Email: jennifer@manifesto.com.hk
Gene Huang
Fudan University
Tel: +86-21-65102737
Email: zhiyinghuang@fudan.edu.cn