THE ‘ASIANISATION’ OF AUSTRALIAN BOARDS

BOARD OF DIRECTORS

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.

The ‘Asianisation’ of Australian Boards October 2015

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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.

BOARD OF DIRECTORS

The ‘Asianisation’ of Australian Boards October 2015

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?

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9 Castlereagh Street

Sydney NSW 2000

Australia

T +61 2 8651 8793 team@johnson.partners johnson.partners

Johnson is a next generation consulting firm working in Board Search, Executive Search and Leadership Succession. We connect the world’s top organisations with the premier leadership they need to transform their organisations, outperform the competition, and achieve their business goals.