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To Capitalize on China’s Boom, Boards Should Recruit Experts

 


Agenda | April 30, 2018



The Agenda article, “To Capitalize on China’s Boom, Boards Should Recruit Experts,” authored by Russell Reynolds Associates Consultant Grace Cheng, emphasizes the importance of recruiting Chinese experts to boards when multinationals are looking to capitalize on China's economic boom. The article is excerpted below.

Late last year, GE signed deals to sell jet engines to China’s Juneyao Airlines and the Industrial and Commercial Bank of China (ICBC). The sales are worth a combined $2.5 billion, and in announcing them, GE said, “China will displace the United States as the world’s largest aviation market in 2022, two years faster than expected.”

GE is not alone in recognizing China’s growth, nor in striving to benefit from it. The nation is home to 1.38 billion consumers. Last year, China was among the top three destinations for venture capital in emerging sectors such as artificial intelligence, financial technology and robotics, according to McKinsey Global Institute, and it is home to more than 25% of the world’s start-ups (“unicorns,” as they are commonly called), valued at more than $1 billion.

To Western companies looking to grow in China, it’s hard to overstate just how different doing business in China is from working in the U.S., Europe or other regions. To succeed, companies need individuals in the boardroom with China expertise and experience — yet most lack it. Only seven companies in the S&P 500 currently have a director of Chinese or Taiwanese descent, as do just eight of the FTSE 350, and five of the ASX All Ordinaries. Overall, just over 100 Chinese individuals are currently serving as directors of publicly traded companies in North America, Europe or Australia.

While this research admittedly doesn’t include China experts who are not Chinese by birth, many Western boards lack genuine local understanding and insights — often while promising their shareholders that “the China market will drive future success.” This lack of Chinese representation in the boardroom when China is a key part of corporate strategy presents an operational and strategic gap between the board, management and shareholders’ interests.

To read the full article, click here.

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To Capitalize on China’s Boom, Boards Should Recruit Experts