All star corporate talent a scarce resource in China
SHANGHAI, Oct 9 (Reuters) – Minutes after news he had quit as chief financial officer of KongZhong Corp. (KONG.O: Quote, Profile, Research), J.P. Gan took a call from a headhunter.
On offer was a top spot at a venture capital-backed Chinese company with plans for an overseas initial public offering.
CFOs and top level executives are in high demand across the globe as cash-rich investment firms put their money to work buying companies, changing management teams, and growing the businesses.
In China the effect is amplified. Young, western-savvy CFOs who have language skills, regulatory knowledge and international experience are highly sought after and hard to find. “Talent is limited, in general. That’s just the way things are in China,” said Jixun Foo, a Shanghai-based managing director at venture capital firm Granite Global Ventures.
Aggravating the shortage is the flow of western-educated executives out of the the corporate and investment banking sectors and into private equity firms and hedge funds.
To name but a few: HSBC China investment banking chief Huan Guocang joined Primus Pacific Partners. Dennis Zhu left JPMorgan to join Oaktree Capital Management while Bain Capital recently hired away Morgan Stanley China chief executive Jonathan Zhu.
Mark Qiu — former CFO of CNOOC Ltd. (0883.HK: Quote, Profile, Research), last year left the top Chinese offshore oil producer to set up a private equity fund.
“Understanding the people-risk factor may be one of the most important things an investor needs to know before coming here,” Foo said.
Buyout firms have invested more than $4 billion in China this year, compared with only $723 million in 2003, according to market data firm Dealogic.
While talented chief executives are in demand in China, many investors view equally talented CFOs as more significant and harder to find, given the increased accounting demands required by global securities markets.
Chinese companies need CFOs who can put in place or modernise their financial infrastructure to satisfy investors and regulators.
That means establishing proper billing procedures, cleaning up books, creating budgets, and setting up legal and compliance departments — areas either neglected in many existing companies or not yet formed in young start-ups.
“There is a great demand for the CFO position,” said Gan of KongZhong, who from 2000 to 2005 was Carlyle Group’s director of venture capital investments in China.
Gan is leaving KongZhong, a $250 million Chinese wireless services company, for venture capital firm Qiming Venture Partners in Shanghai. He said he knows at least 10 venture-backed companies hunting for CFOs right now.
One key executive requirement is solid English skills.
With Wall Street investors and outside regulators increasingly involved with corporate China, English is seen as essential, especially for CFOs who handle the bulk of calls from such people.
A CFO of a foreign-listed or Hong Kong-listed Chinese firm can expect to earn anywhere from $150,000 to $500,000, plus options, said several people interviewed for this article, with CEO’s earning slightly more.
That is well short of what some U.S. and European executives make, but it is more than many non-listed, old-style Chinese companies would pay.
Also fuelling CFO demand is a string of successful new China listings, which have sparked a rush to the initial public offerings market.
Peter Mok, President and CEO of KLM Capital Group, an investment firm specialising in Asia, says the real talent search action goes on among companies going for IPO.
“They are looking for someone who understands GAAP (Generally Accepted Accounting Principles) and who can connect with Wall Street,” he said. “They need a guy who is dynamic and who is going to stay up late to talk to New York.”