By Jason Johnson
CTPartners Managing Partner, Asia Pacific
Australia’s impressive Asian talent pool yet to realize its fullest potential. This can be a costly mistake for any global company, particularly those based in Australia. The region is forecast to account for about 40 per cent of the world’s combined gross domestic product by 2030, and is viewed by most major companies as a core area for future growth.
Asia is one of the most attractive regions for new business investment but far too few companies have broken through the so-called “bamboo ceiling” by adding individuals with Asian cultural knowledge and expertise to their corporate boards.
This can be a costly mistake for any global company, particularly those based in Australia. The region is forecast to account for about 40 per cent of the world’s combined gross domestic product by 2030, and is viewed by most major companies as a core area for future growth.
Any company investing overseas stands to benefit from board representation that understands its key regional markets. A board simply cannot fulfill its duty to review and develop strategy without expertise in the places where it plans to expand. The goal of breaking the bamboo ceiling applies to all companies seeking to conduct business in Asia but this is especially the case for Australian companies, whose proximity to the region implies an even greater reliance on Asian markets for future growth.
To date, Australian companies have been relatively slow to add leaders of Asian descent to their boards. Among the ASX 200, only 4.15% of directors — and 1.9% of executive managers — had Asian cultural origins in 2013, according to a report by the Diversity Council of Australia.
There are signs this situation is changing. CTPartners has identified an emerging trend of Australian companies appointing directors with Asian experience and heritage to their boards. Leading the pack are the Commonwealth Bank of Australia (which appointed former Citi Chairman and CEO in Asia Shirish Apte to its board), Telstra (which appointed Chin Hu Lim as a director), QBE (which appointed Margaret Leung as director), ANZ, NAB, BHP Billiton, and Santos.
We forecast a rapid increase in the percentage of directors with Asian cultural origins at top Australian companies. At play are many of the same factors which led to the fundamental repositioning of gender diversity of Australian boards. Between 2010 and 2014, the percentage of female directorships on ASX 200 boards doubled from 8.3 per cent to 17.6 per cent. Corporate Australia has come to recognise gender diversity delivers benefits ranging from stronger financial performance and an enhanced ability to retain top talent to heightened innovation and improved board effectiveness. This is about doing better business, not paying lip service.
Just as concerted effort from multiple stakeholders is working to break the “glass ceiling”, so too will a focus on the cracking the bamboo ceiling. But achieving change isn’t a simple task. There is a shortage of public company board-ready candidates with extensive senior leadership experience in the Asian region. Differences in governance norms between Western and Asian companies, not to mention the preponderance of private, family and state-owned companies in Asia, means that not all Asian executives will be a good cultural fit with Western companies.
Working with our clients, we adopt several strategies to address this challenge. First, we review the limited pool of Asian executives who have experience working with Western multinationals. While these candidates are relatively scarce, they may represent the ideal solution for an Australian company. Second, companies may consider appointing Western executives with significant experience working Asia, who can provide regional knowledge, contacts and networks. Finally, executives with Asian cultural heritage and experience who are living and working abroad can also be considered for board roles.
Rather than simply seeking to appoint candidates with prior CEO experience, boards must focus on the key attributes and capabilities required.
There is another strategy gaining momentum in Australia and elsewhere: establishing advisory boards to provide insights into target regions. Unlike corporate boards, whose responsibilities center on governance, strategy and compliance, advisory boards focus on business development. Members share their professional networks and knowledge about how to navigate political systems, helping companies expand into new markets.
Advisory board roles do not necessarily demand the same depth of business experience as public board directorships but the ability to materially impact the business is vital. The most valuable advisory board members would be those with first-hand experience in building businesses in multiple — or the most relevant — marketplaces.
Whether through corporate board placements or the use of advisory boards, companies wanting to expand into Asian markets need to break through the bamboo ceiling. Doing so will minimise the real risks that can arise from gaps in regional knowledge, allowing Australian companies to capitalise on the business opportunities in Asia.
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