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Western boardrooms make way for more Asian execs

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Western companies have traditionally stuck to their backyards when it comes to recruiting board members, but this is changing as businesses look to expand into Asia, a recruitment company has found.

According to DCTA – which surveyed the 20 largest companies in the U.S., U.K., France and Germany – the number of Asian executives holding non-executive director positions in these companies has more than doubled from just nine in 2009 to 23 this year.

The survey was based on the top 20 companies of the U.S. Fortune 500 and the 20 largest companies by market cap in the U.K., France, and Germany.

"With an increasing number of Western companies looking to expand in Asia, there is a growing belief that you need to have local talent at the very senior level to be able to fully exploit the region's growth potential," said Fabrice Desmarescaux, managing partner and co-founder of Singapore-based DTCA, which specializes in placing executives in top roles and on company boards.

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"We are seeing a big increase in the number of Western companies that have approached us to explore the possibility of appointing Asian executives to their boards," he added.

Executives from India, Singapore and Hong Kong are leading the pack, accounting for 19 of the 23 Asians appointed to the governance boards of the surveyed multinationals.

UK boardrooms most diverse

The trend is being led by UK-based companies, with eight of the top 20 firms surveyed having Asian non-executive directors. The number of Asians holding director positions with UK companies has risen to 15, from seven in 2009.

This is followed closely by French firms - with six of the top 20 companies having an Asian executives on their board.

The U.K. and French leads over the rest of the world could be down to their historical presence in, and familiarity with Asia, said Desmarescaux.

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"In recent years, French companies have also embraced the notion that only an international board could adequately supervise an international business. English has progressively been introduced as the language of reference on many boards thus allowing the appointment of non-francophone independent directors,"he said.

American and German companies are lagging behind on this front, however.

Many Western businesses with a presence in Asia have not reacted quickly enough in diversifying their board members, said Harry O'Neill, head of CEO and board practice, Hong Kong, at executive search firm Heidrick & Struggles.

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"I picked four major Western companies at random – Daimler, Munich Re, Citi and PepsiCo. Out their four boards, there's only one Asian and that's the CEO of PepsiCo," he said. "It's astonishing that Daimler, which has a huge presence in Asia, and says China is their most important growth driver does not have an Asian on their board. You would have to look at that and think, it doesn't make sense."

However, boards are increasingly looking into this, said O'Neill. "Sitting down with boards of Western businesses, they are beginning to realize how complex the region is and recognizing that you really need a local perspective."

In a written statement to CNBC, Daimler said "international diversity, also on management levels, is one of our main [objectives] within our global diversity strategy." However, it did not comment on the makeup of its board.

Asian directors wanted

Joining a company board may sound like an attractive proposition for any executive, but few senior Asian executives are actually interested in joining foreign boards, according to recruiters.

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One reason for this is that Asian non-executives directors are already sitting on many boards. It is not uncommon for a director to be on the boards of three or four publicly listed companies as well as a few private holdings, schools, and other charitable organizations.

"Sometimes it comes down to logistics. If you have a board of a North American enterprise that meets 6-8 times a year in Minneapolis and someone is based in Beijing, Hong Kong or Jakarta, they are going to find it difficult to make the commitment that's needed," said O'Neill.

Liability concerns is another reason cited, mostly made in reference to U.S. boards given the spat of lawsuits against directors.

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"To attract Asians, boards must be very efficient," said O'Neill.

"Boards where Asian executives participate are mostly those that are run efficiently, often starting on a Monday or ending on a Friday so that travel can take place over the weekend. Committee meetings are well prepared and many out-of-cycle decisions are carried out over conference calls," he said.