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UK Groups Cast Net Towards China for Executives

Gill Plimmer, Financial Times

Companies face a scramble to hire talented executives with Chinese experience to join their boards as the focus of UK business shifts increasingly towards the east, according to a survey.

Tony Weller | Getty Images

There is only one FTSE 100 non-executive director from China’s mainland – Li Ruigang at WPP – with another six from other parts of the region such as Hong Kong and Singapore.

These are Euleen Goh at Aviva ; Fu Hua Hsieh at ICAP ; Marvin Cheung and Laura Cha at HSBC ; C.K. Chow at Anglo American ; and Ying Yeh at IHG .

But as China becomes a growing source of revenue for UK business, headhunters point out that FTSE companies need much greater representation. Not only is there a dearth of western talent that understands Chinese culture and can operate effectively in the country, but there is also a shortage of bilingual indigenous Chinese who can fit in with the demands of western multinationals.

Susie Cummings, head of board practice at Blackwood Group, the executive search agency that carried out the research, says this could hamper plans for expansion in the region.

“UK companies are aware of the potential strategic and commercial implications of the talent gap, but they need to address the situation urgently or they will be at a competitive disadvantage to more established players from other parts of Europe and domestic organisations,” she said.

The need for talented executives to bridge this gap gained added resonance this month when HSBC announced it was recruiting staff for its Hong Kong offices even as it announced job losses in the UK.

According to official data, UK exports to China have more than doubled in the past four years – from £3.4 billion ($5.6 billion) in 2006 to £7.6 billion ($12.5 billion) in 2010. The government plans to double this again by 2015.

In January, David Cameron and China’s vice-premier Li Keqiang agreed £2.6 billion ($4.3 billion) in trade deals including an increase in sales of Jaguar Land Rover vehicles to China; an oil exploration agreement between BP and the oil company Cnooc; and a framework deal between PetroChina and the private UK company Ineos on refining joint ventures.

Ms Cummings said FTSE companies would struggle to achieve more of these deals unless they devoted the same attention to geographical diversity as they paid now to gender imbalances.

Nearly all the groups in the survey – which included GlaxoSmithKline , Rio Tinto and Barclays – cited the importance of connections with the Chinese government. China’s economic system and its legal and commercial structures also differ markedly from frameworks common in the west.

For example, China does not have a functioning bankruptcy law, making liquidation of insolvent companies more of a challenge. Also, the state banking system has been keen to support domestic industries with a steady supply of cheap credit.

The lack of available talent has been accentuated by Chinese managers often preferring to work for state enterprises or domestic companies, said survey respondents.

Differences in corporate culture could also be an issue. Chinese companies tend to see corporate governance as a western import that is little more than a box-ticking exercise.

This is partly due to a cultural environment that encourages deference and privacy and a political environment in which up­wards accountability is discouraged, said Ms Cummings.

“Don’t underestimate the cultural issues,” said one chairman, who added that “loyalty, face, consistency and persistence are key to success in China”.

One common way for companies to enter the Chinese market is by pursuing joint ventures with local groups. Such arrangements have a mixed success rate, as inexperienced foreign entrants may be exploited by their local partners.

Joint ventures often require transfers of intellectual property to the Chinese company with several respondents mentioning the risk of piracy.

Tony Vardy, head of the London office at Korn/Ferry Whitehead Mann, said the small pool of talent available was made even smaller by the difficulty of finding Asian candidates willing to travel to the UK for regular board meetings.