Executive Summary
As shareholder activism grows in Asia, government regulations grow more stringent, sustainability concerns increase, and boards rapidly increase focus on technology and talent, collective board leadership is going to remain a challenge in most Asian organizations unless they change course. Part of the problem, the authors write, is that the majority of organizations they interviewed erroneously translate ‘board leadership development’ as recruiting high-profile board directors, yet ‘trophy’ directors almost never help improve the quality of governance leadership on Asian boards. Collective board leadership involves much more than skills and capabilities. It includes governance maturity, clarity of mandate of key stakeholders, individual accountability, and diversity of skills and capabilities on boards. The authors found that boards in Asia are beginning to spend more time discussing future readiness; board and management interactions are on the rise, board leaders are more eager to learn about future trends, and recruiting directors with technology skills is becoming more of a norm rather than exception. But, they write, individual companies need to take action now to build stronger corporate boards if they are to succeed.
After the financial crisis of the late 1990s, most Asian countries reformed their governance codes and regulations around management accountability and transparency. Despite this, the region has still experienced significant and high-profile corporate governance failures. Why? Because many boards failed to reform. In a recent study, we found that corporate boards in Asia still lack adequate leadership, supervision and oversight, despite the fact that analysts predict that Asia could soon become the world’s largest economy by GDP contribution, contributing roughly 60% of the global growth by 2030.
Our research leads us to believe that if individual companies are going to succeed, they are going to have to focus attention on strengthening and empowering their corporate boards. Our study, based on 109 interviews and 350 surveys of board directors in over 400 mid- to large-size organizations across Asia, found Asian corporate boards are underprepared to deal with the cultural pressure to maintain harmony and preserve hierarchy and concentrated ownership structure in most Asian organizations. Furthermore, one in two board leaders surveyed in the research thought that one or more of their peer directors need to be replaced because they did not merit a place in the boardroom.
Part of the problem, we discovered, is that the majority of organizations we interviewed erroneously translate “board leadership development” as recruiting high-profile board directors, yet “trophy” directors almost never help improve the quality of governance leadership on Asian boards. Collective board leadership involves much more than skills and capabilities. It includes governance maturity, clarity of mandate of key stakeholders, individual accountability, and diversity of skills and capabilities on boards. Luckily, our research identified five ways corporate boards in Asia can improve.
1. Understand how external and internal governance maturity impacts your firm.
Board leadership needs to be grounded in strong country and company governance maturity. Corruption, bureaucracy, and lack of transparency in the home country jurisdiction impact company’s governance practices. Asian boards must also neutralize the impact of a country’s culture that centers around hierarchy, collectivism, “saving face,” and conflict avoidance, as it may hinder open conversations in the boardroom. Even the most intuitive activity of continuously reflecting, discussing, and debating best ways to strengthen the governance processes and tools can be quite daunting due to the concentrated shareholding, and therefore uneven distribution of power within Asian boards’ set-up. Boards in Asia must overcome governance stalls that often slow them down.
2. Engage board members who have the right intent and learning mindset
Board leaders must reflect on individual and collective intent and capability. The intent of independent board directors often decides the quality of leadership. Why have directors taken up a board responsibility? What is their key motivation? What do they want out of board appointment? How bought-in are they to the values, mission, and vision of the organization? How deeply do independent directors reflect and feel accountable towards their role? These questions often decide the level of individual commitment towards the board role.
In our research, 29% of surveyed board leaders in Asia sit on four or more boards, some representing as many as nine boards. As a result, individual accountability towards all board positions often gets diluted. Board chairs must ensure that directors are able to carve out enough dedicated time for each board engagement. Board leaders must also regularly engage in capability development, especially in self- and strategic-leadership skills. Sadly, time spend on capability development shows up at of the bottom of the stack of 24 board activities evaluated in our research.
3. Curate a diverse team
While we found that Asian boards have sufficient skills diversity, there are serious gaps in ethnic, tenure, generational, and gender diversity. Global studies indicate that there is often a positive correlation between diversity and board performance. Nominating committees must look beyond the typical chartered accountant, lawyer, and ex-CEO profile, while identifying new board directors. Focusing on digital, artificial intelligence, cybersecurity, branding, and related skills will help Asian board ramp quickly up on future-readiness.
4. Measure performance and clarify role expectations
Almost 26% of respondents said their boards had no evaluation process in place, and another 23% shared that their boards conducted only self-evaluation. Lack of objective and comprehensive evaluation process often breeds complacency and subpar board performance. Asian boards must also do better in defining the role of, and expectations from, the board directors, chairperson, and CEO, clearly outlining where they should be spending maximum time. Our research found three external activities where board leaders’ involvement can directly impact business — client visits, partnering on sales efforts, and engaging in vendor conversations.
5. Build a culture deep-rooted in trust
Our research found that board culture based on spirit of collaboration, candor, challenge, commitment, and trust is often the difference between a group of rock-star board directors and a rock-star board. Ineffective boards often lack engagement and synergy with the management and among board directors themselves. We found a gap of 25% between desired and current level of interaction between board members and management, and a similar gap between desired and current level of interaction, communication, and engagement among directors on the board. While good board culture is about trust and transparency between the CEO and the board such that they can be true sparring partners, 29 percent of respondents said boards in Asia play a “rubber stamp” role for the management “most of the time” or always. Asian boards must create a culture of openly sharing diverse views, intense dialogue, and clear and quick decision-making.
As shareholder activism grows in Asia, government regulations grow more stringent, sustainability concerns increase, and boards rapidly increase focus on technology and talent, collective board leadership is going to remain a challenge in most Asian organizations unless they change course. In our research, however, we found that boards in Asia are beginning to spend more time discussing future readiness; board and management interactions are on the rise, board leaders are more eager to learn about future trends, and recruiting directors with technology skills is becoming more of a norm rather than exception. Collective board leadership, we know, is a competitive advantage. With clear signals on how Asian boards can improve, individual companies that take action now are likely to succeed.
"how" - Google News
July 13, 2020 at 08:07PM
https://ift.tt/32fXHR8
Research: How Corporate Boards in Asia Can Improve Governance - Harvard Business Review
"how" - Google News
https://ift.tt/2MfXd3I
Bagikan Berita Ini
0 Response to "Research: How Corporate Boards in Asia Can Improve Governance - Harvard Business Review"
Post a Comment