Australia’s parochial company boards are failing to equip themselves for Asia. This is a major barrier to developing our potential in the region and improving productivity.
Our ASX 300 directors club retreat from Asia has become a rout.
The 2012 Henry report, Australia in the Asian Century, provided a national blueprint for Australia to navigate and capitalise on the rapid economic growth of Asia. The report recommended that a third of board directors should have deep knowledge of Asia.
That report was ignored and expunged from the Prime Minister and Cabinet website by Tony Abbott. What a relief for ASX directors!
We now have, not 33 per cent, but only 6 per cent of ASX-300 directors from non-Anglo Celtic backgrounds. Anglo-Celtic directors now make up over 90 per cent of ASX 300 board seats. The Governance Institute of Australia has also noted that when companies replace culturally diverse board members, they primarily recruit directors from the US, Canada and New Zealand rather than the Asian region.
Boards have improved their representation of females but their performance in recruiting directors and senior executives with interest and skills for Asian business has worsened. The bamboo ceiling and the old boys club is still very much in operation in our top 300 companies.
This seems counter-intuitive when one considers the Asian presence here – students, visitors and trade. But we are probably less Asia-ready than we were 50 years ago. In the 1980s and early 1990s, at the time of the Garnaut report, we were making progress in such areas as Asian language learning, media interest in Asia and cultural exchanges, but since then we have been ‘on smoko’. The national policy on Asian languages adopted by the Hawke government and COAG has run into the sand. Most Asian language learning is in crisis.
The business sector’s failure to skill itself for Asia has been a major barrier to developing Australia’s potential in the region and improving productivity in this country. There is, at best, only a tiny number of directors or CEOs of any of our top 300 companies who can fluently speak any of the languages of Asia. They show little interest in upskilling themselves.
This lack of knowledge and understanding of Asia in corporations has meant that university graduates with Asian skills have not found the employment opportunities they hoped for. On the employment front, many of them ran into a dead end. In the 1990s I knew and encouraged many Australian young people who had acquired Asian skills. Unfortunately, they had to go offshore for work, for example to Hong Kong or Japan, or work for multinational companies. What a loss! Australian employers just didn’t get it.
For decades our best public schools have been dominating secondary school results. Many students come from Asian backgrounds. University results show a similar trend. But despite this our business sector remains a largely closed Anglo-Celtic shop.
The attitude and behaviour of board directors and CEOs is reflected in the attitudes and behaviour of their organisations. Consciously or perhaps in some cases unconsciously, they reflect social class and race. With little diversity and narrow experience, they select and appoint people like themselves.
One would expect the outstanding results from students of Asian origin in Australia would finally show up in senior positions across all our institutions. But it doesn’t.
One reason for this serious under-representation of people of Asian background in our major institutions is that, while private, particularly ‘independent’, schools may have no better educational results than public schools, the graduates from those private schools nevertheless succeed in accessing senior positions in many institutions.
Parents pay very high private school fees that in effect buys access to ruling social and economic groups. They pay money to get their children into a social network that will favour them against children from public schools such as James Ruse in NSW that have quite remarkable results. Social connection often counts more than ability. Social class has a way of perpetuating itself.
We should stop pretending that social class is not an important feature in Australia, particularly in some of our key institutions. The problem is especially rampant at senior business levels. The Business Council of Australia ignores it. It is also true in the professions, academic, media and political institutions.
We have a large resource in our Australians of Asian origin. But they encounter a bamboo ceiling in many of our institutions and specifically in our major companies.
My experience of living and working in Japan for three years in the late 1970s showed me how parochial Australia was. It is still the same today. Living in an overseas country provides a mirror to our own country. We can see more clearly our country’s strengths and weakness. Distance provides more clarity.
Our business parochialism is a major barrier to successful long-term participation in the largest growing market in the world. Our companies opportunistically see Asia as customers of opportunity rather than partners. In the long term, trade and investment is about relationships of trust and understanding. That can’t be achieved through an intermediary or an interpreter.
Maybe we don’t need an Asian language or indeed much business sophistication to dig up and sell iron ore and coal to very willing buyers, but we certainly do to sell wine, elaborately transformed manufactures and services, particularly tourism.
Success in Asia requires long-term commitment but the remuneration packages and the demands of shareholders are linked to short-term returns. Corporate governance in Australia is failing to equip us for the Asian century.
Firms send staff overseas in a quite ad hoc manner. They are not using that experience gained overseas to enrich the talent pool of their organisation. Few companies have a global talent management agenda. Many international assignees return before the end of their contracts or on return from overseas postings quickly leave their organisations. They feel that the cultural experience overseas has changed their outlook on the world but the culture of the company back home is unchanged.
The business and other opportunities available in Asia are not new. The spectacular economic rise of Japan started 70 years ago. It was followed by Korea. Now it is China and many others. Where has our business sector been in the last 70 years? It has profited opportunistically but has not built the skill base we need for the long term.
Donald Horne in the 1960s said that ‘Australia is a lucky country run by second-rate people who share its luck’. That is still true. And most true of our businesses and media today.
The key is for Australia to be open…open to new people, new investment, new trade, new languages and new ideas.
My experience, admittedly with government corporations Qantas and Telstra, was that many directors were most concerned about board reappointment rather than surveillance of the company. It is still true of most public companies in Australia.
Join the Anglo-Celtic club. That is the way to promotion.
John Menadue is the Founder of Pearls and Irritations and a board member. He was formerly the Editor-in-Chief. John was the Secretary of the Department of Prime Minister and Cabinet under Gough Whitlam and Malcolm Fraser, Ambassador to Japan, Secretary of the Department of Immigration and CEO of Qantas.