omniture

Heidrick & Struggles and Fudan University Study Calls for More Independent Board Directors in China


SHANGHAI, China, Feb. 8 /Xinhua-PRNewswire-FirstCall/ -- Heidrick & Struggles International, Inc. (Nasdaq: HSII), the world's premier executive search and leadership consulting firm, has sponsored a Benchmarking Corporate Governance in China study based on 15 months of research conducted by Fudan University in Shanghai. Recommendations from the study include a call for Chinese companies to recruit and value the opinions of independent directors.

The study found that, as in Chinese society, patriarchy -- especially in private enterprises -- prevails. The tendency toward having a "weak board and strong chairman" is common, and boards tend to be tight-knit groups built on business or personal networks. Independent directors are mostly brought in to fulfill legal requirements and are limited to advisory roles. Other key findings about boards in China include:

-- Only 50 percent are evaluated.

-- Their power to influence stakeholder interests is limited.

-- They have limited influence on CEO selection, particularly since a high

percentage of chairmen are also the CEO of the company.

-- Except in private enterprises, they have little influence on daily

operational matters.

-- Native Chinese companies are still resistant to electing foreigners to

their boards.

The study calls for Chinese companies to recruit and value the opinions of independent directors in order to maintain the right balance of thought leadership for the best stewardship of their organizations. As independent directors rise in importance, their compensation packages should be open and flexible to match their contributions to the company. As companies grow and expand, external and internal auditing systems must be rigorously adopted and carried out. Government supervisory committees, which are often staffed with individuals who have no industry expertise, should be reorganized when possible.

Steve Mullinjer, Managing Partner, Heidrick & Struggles China, said: "We are very encouraged to see that the government is starting to require the wholly owned state enterprises to build up boards in order to improve corporate governance. Key committees -- mainly auditing, compensation and nomination committees -- have been set up to support the decision-making of the boards. But our results show that personal networks and connections are largely what bind these boards together. Although this is very much in keeping with the Chinese cultural tradition of 'guanxi,' it also opens the door for cozy relationships that can breed corporate corruption. This will be one of the greatest challenges for Chinese companies and regulators in the future."

Professor Lu Xiongwen, dean of the Fudan University School of Management, added: "The government has aggressively pushed for reforms as Chinese companies are remaking themselves to be competitive on a global level. These twin forces virtually assure that corporate governance and the responsibilities of company boards will move toward greater openness and accountability in the future. Domestic companies are looking to the success of market leaders like Lenovo, and are eager to follow in their footsteps."

About Heidrick & Struggles International, Inc.

Heidrick & Struggles International, Inc. is the world's premier provider of senior-level executive search and leadership consulting services, including talent management, board building, executive on-boarding and M&A effectiveness. For more than 50 years, we have focused on quality service and built strong leadership teams through our relationships with clients and individuals worldwide. Today, Heidrick & Struggles leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. For more information about Heidrick & Struggles, please visit http://www.heidrick.com .

About School of Management, Fudan University

Strategically positioned in Shanghai, an emerging capital of national economics, trading, finance and transportation, Fudan University can lay claim to nearly one century of continuous existence. Today, Fudan is internationally recognized as a leading business research and educational institute, launching a variety of joint programs with prestigious partners including Sloan School of MIT, Olin School of Washington University in St. Louis, the University of Hong Kong, Bocconi University, and Norwegian School of Management and the University of New South Wales, etc.

About the Corporate Governance in China study

Sponsored by Heidrick & Struggles, this Corporate Governance in China study is the result of 15 months of research, interviews, discussion and consultation. The research is based on in-depth interviews with the Chairmen or Presidents of 50 leading PRC and multi-national companies in China. A total of 1,000 questionnaires were distributed, with over 100 returned. Questionnaire respondents included top-level board members and executives. The study covered various industries and different regions.

A strategic study that focused primarily on the structure, function and organization of the boards, as well as the roles of the board members and their relationships, this research is unprecedented in China and provides new and unique insight to corporate governance in China.

Source: Heidrick & Struggles International, Inc.
Keywords: Food/Beverages
collection