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

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

February 08, 2007

    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.


    NOTE TO EDITORS: 

    The points highlighted here represent partial key
findings. To arrange an interview or to request hardcopies
of the study, contact Jennifer Tow, Manifesto Ltd, +852
2526 1972 or [e-mail]

    For more information, please contact:  

    Heidrick & Struggles
     Eric Sodorff
     Tel:   [phone] 
     Email: [e-mail]

    Manifesto Ltd
     Jennifer Tow
     Tel:   [phone]
     Email: [e-mail] 

    Fudan University
     Gene Huang
     Tel:   [phone] 
     Email: [e-mail]


SOURCE  Heidrick & Struggles International, Inc.