The bold new future of board leadership in Asia
Science fiction writer William Gibson famously once said, “The future is already here, it’s just unevenly distributed.”
In times of increasing uncertainty, it is equally certain that envisioning a bold new future is difficult. Typically, planning future strategies starts with revisiting usual elements such as projecting out historic results to future performance, analyzing existing competitors, or focusing on executing near-term results. What’s missing is a systematic approach to understanding and taking advantage of the unknown. This is why leaders need to embrace skills, practices and behaviors of futurists.
The Center for Creative Leadership (CCL) recently released the BOLD 3.0: Future Fluent Board Leadership in Asia research study that not only helps boards and board leaders in Asia to examine the current status of their collective leadership, but also enable them to look into the horizon and align their capabilities accordingly. The study, conducted over the past 12 months in partnership with Confederation of Indian Industry, Singapore Institute of Directors, Institute of Corporate Directors (Philippines), Sri Lanka Institute of Directors, Institute of Corporate Directors Malaysia, and Vietnam Institute of Directors, is based on 109 interviews with board leaders in Asia and a pan-Asia survey.
John Ryan, President and CEO, Center for Creative Leadership shares, “For more than a decade now, it’s been my privilege to serve on the boards of three public companies and as the lead director on two of them. What have I learned from these experiences and in meetings with dozens of CEOs and other directors globally? The bad news is that too many boards overestimate their achievements, and too many board members are skeptical about the critical importance of continuing to develop their own leadership skills. The good news is that boards have a tremendous opportunity to function more effectively and accelerate their impact – if they commit to building their own leadership capacity.”
Asia, which is undoubtedly the “new” center of the world, is also emerging as the biggest catchment area for talent and a hotbed for entrepreneurial activity. Analysts predict that the region could become the world’s largest economy (by GDP contribution) by 2030. Even as Asia has been on a sharp economic growth trajectory for the last few decades, the region has also witnessed several big and small corporate governance failures. Starting in the early 2000s, in response to the financial crisis, national governments across Asia led hectic efforts to strengthen corporate governance codes and regulations. Governance tightening initiatives however have not completely arrested sporadic corporate governance issues, which continue to emerge at regular intervals. This has led to a realization that Asian organizations also need to take a much closer look at the human elements of governance—the makeup of the leadership in the boardroom. This realization, coupled with disruptive markets and higher expectations from stakeholders, now more than ever, puts board leadership in Asian enterprises in the spotlight.
“The tip of the iceberg, which is only about 10% of governance issues that you can see, is taken care of by the rules, regulations, processes, and practices. But there is another 90% that nobody is talking about and focusing on, and these are behavioral and leadership aspects of corporate governance. These, I would say, are the invisible, deep and swirling waters," commented a senior board director at an Indian conglomerate, referring to the need for focusing on human element of governance. What does a board leader in Asia look like?
The research by CCL reveals that men dominate Asian boards. Some countries such as Vietnam and Malaysia are ahead of the curve as compared to Indonesia and Philippines. Malaysia has a prescribed 30 percent quota for women leaders in organizations with more than 250 employees.
The report highlights the need for more diversity on boards in Asia however, one of the board directors who participated in the study cautioned against increasing diversity just to make boards look good. He said: “Obviously there is a push for more diversity and more women, which I think is good, but I think you have to strike a balance; it’s not just a question of getting people who have diverse backgrounds and will contribute diverse opinions, it’s important to have directors with right."
You can fill your board with a whole array of people, but they must also fill a knowledge gap on board.
Board leadership challenges in Asia:
The study Bold 3.0: Future Fluent Board Leadership in Asia found that there are six broad factors that hinder the growth of effective leadership on Asian boards. These range from a lack of governance maturity in most of developing Asia, to concentrated shareholding, to capability and skills gaps, to regional cultural influences.
CCL research suggests that almost one in two respondents thought that one or more of their peer directors need to be replaced since they do not merit a place in the boardroom. The most stark finding of this highlight was that board directors’ resistance or inability to contribute to the discussions (28 percent) and not challenge the management (20 percent).
The study BOLD 3.0: Future Fluent Board Leadership in Asia highlights six shifts to prepare Asian organizations, boards, and board leaders to embark on the future fluency journey:
From focus on governance processes to human element in the boardrooms:
Most countries in Asia have witnessed corporate governance breakdowns over the past decade. In response, governments have led multiple efforts to strengthen regulations and governance codes. However, even that has not arrested sporadic corporate governance issues, leading to a realization that organizations need to also take a closer look at the leaders in the boardroom.
The evolution of board leadership in Asia happened in three distinct phases.
- Phase one, when leadership was mainly exercised by the promoter, family, or close group of shareholders.
- Phase two, when governance codes were tightened, and there was a push for independent directors.
- Phase three, when we are seeing a focus on collective leadership on Asian boards (BOLD 3.0).
From individul leadership to collective leadership:
Effective leadership on Asian boards is akin to building a “leadership house” with three distinct elements. The foundation constitutes the context in which boards operate – corporate governance processes, ownership structure, country jurisdiction, and national culture; the pillars are individual motivation of board leaders, capabilities they possess, clarity of mandate at the board level, and diversity. The roof of the leadership ‘house’ is the enabling board culture.
The here-and-now to future-fluent skills and behaviors:
Boards worldwide, must play supervisory and stewardship roles, which translate into fiduciary, strategic, and "new frontier “responsibilities. However, board ahead of the curve take their responsibilities much further than the plan vanilla fiduciary role.
Four behaviors outstanding board directors in Asia often display:
- Asking questions
- Speaking their mind
- Displaying mature judgment in evaluating decisions
- Developing trusting relationships.
The top five skills board leaders in Asia must have for sustained impact include
- Trust and credibility
- Sound judgment
- Strategic intent
- Having a long-term view
- The ability to do strategic planning
From functional and technical to strategic leadership capabilities:
Capabilities on Asian boards have traditionally centered around functional and technical skills—understanding of the governing law of the land, regulations, governance codes, financial savviness, etc.
Most boards are quite content with these two streams of capabilities. They rarely look at nurturing, leveraging, or developing leadership skills and capabilities.
As Asian board leaders prepare to take organizations forward, they will need to further develop their individual leadership skills and strategic skills.
From brilliant board leaders to a brilliant Asian board:
Boards in Asia must curate the “right” board culture, comprising of five key elements:
- Board dynamics must display a culture of 4Cs: collaboration, candor, challenge, and commitment.
- In addition to the 4Cs, the level of trust among board directors, between board and management, and between board and CEO is often the most critical element of board culture.
“This BOLD 3.0 research will hopefully not only help Asian organizations think through their board leadership more deeply, but also approach capability development piece differently – from assembling a group individual rockstars, to a rockstar board that can make collective leadership magic happen,” said Sunil Puri, the lead author of the study and the head of APAC research at the Center for Creative Leadership.
Ryan further shares, “The report BOLD 3.0: Future Fluent Board Leadership in Asia offers a roadmap for navigating that journey to improve board performance and alerts us that boards will need to fill a more strategic role in the next decade. It’s up to you – whether you are a CEO, a current board member or aspire to be either in the future – not just to reflect on the wisdom contained in these pages but to take action now. The organizations you are privileged to serve are counting on you!”