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Lessons for Women, from Chinese Boardrooms

Volume 1, 2013

By Professor Yan (Anthea) Zhang

Despite the many progressive strides made in the past few decades to give women access to career paths that lead to the executive suites, there are still very few women in Western companies who have made it past middle management. According to Catalyst, a not-for-profit research organization, as of 2009 only 12 (or 2.4%) companies in the Fortune 500 had female CEOs or presidents; in the Fortune 1000, there were only 25 (or 2.5%). As for directorships, in 2011 women held 16.1% of board seats (15.7% in 2010)  in the Fortune 500.

What does it look like inside the boardrooms of Chinese listed companies? Some things are similar to the situation in the West; yet some are quite unique to China. Figure 1 shows gender distribution at the CEO and board chair  levels of companies listed in China’s Shanghai and Shenzhen Stock Exchanges from 1997-2010. While the number of listed companies has increased exponentially (from 720 in 1997 to 2,100 in 2010, and up to 2,477 in 2012), the proportion of females in these two posts remained stable. The proportion of female board chairs was 3.7% in 1997 and 4.0% in 2010. The proportion of female CEOs was 4.6% in 1997, rising to 5.6% in 2010.

TheLINK Volume1, 2013

Looking more closely, the proportions of female board chairs and CEOs were higher in non-state-owned enterprises (non-SOEs) than in SOEs (Figures 2 and 3, respectively). Female CEOs at non-SOEs, in particular, increased from 5.1% in 1997 to 8.2% in 2010.

The trend in female directorships seems even more encouraging (Figure 4). The proportion of female directors (including the board chair position) increased from 9.2% in 1999 to 11.7% in 2010. Again, the proportion was higher in non-SOEs (13.7%) than in SOEs (10%).

Comparing Chinese data with US data also shows some interesting patterns. While the Fortune 500 saw a higher proportion of female directors (15.7% vs. 11.7% in Chinese companies in 2010), their proportion of female board chairs (2.6% in 2010) was actually lower than in Chinese companies (4% overall, 2.9% in SOEs and 5.4% in non-SOEs). It is important to note that these ratios were still a far cry from the 40% mandatory quota as proposed recently under EU legislation.

Does this mean the glass ceiling is less of an issue in Chinese companies than in US companies? Not necessarily! As discussed above, the increase in female executives in Chinese companies was mainly driven by the non-SOE sector. What causes the different trends in SOEs and non-SOEs? One reason: in the non-SOE sector, many female CEOs/board chairs are founders/owners of the companies – for example Zhang Yin of Nine Dragons Paper Holdings. Some other female CEOs/board chairs were basically born into the position, for example Yang Huiyan at Guandong-based real estate company Bi Gui Yuan. Yang took over the company when her father stepped down.

If we consider executive succession as a tournament, this tournament is not open to everyone. In the case of Yang Huiyan, she was the only “eligible” participant in the Bi Gui Yuan tournament. Family businesses thus create “fast tracks” to bring some females to the boardrooms. In the tournaments of China’s SOEs and American publicly-listed companies, however, the number of “eligible” participants is much larger. Since most of the “eligible” participants are males, statistically speaking there is a greater chance those companies will have a male CEO/board chair/directors.

The second reason: China’s non-SOEs are at a disadvantage in the competition with SOEs because of resource limitations. This has provided them with a strong motivation to look for talent in various ways. Compared with non-SOEs, SOEs are in the “comfort zone”. These “nonconventional talented individuals”, for example females and minorities are more like ornaments for them.

The last reason: people with similar backgrounds tend to appreciate each other. Based on my research, companies with female CEOs have more females in their boardrooms. Accordingly, companies with a higher percentage of female directors are more likely to hire female CEOs.

To conclude, instead of a mandatory quota for female directors (or executives), I have two suggestions. 1) A mechanism should be introduced to encourage competition, because this is the most powerful tool in pushing companies to enlarge their talent pool. 2) We need to increase the number of female participants in the tournament in order to increase the number of females in the boardroom.  For those with the ambition to make it to the top post, it is important to take “profit and loss (P&L) responsibility”. It helps one to build credibility within and outside the company. Instead, many females choose functional career paths, such as Human Resources (HR) and accounting. Specializing in one function too early and for too long can limit one’s career advancement.

Eventually it is track record, competence, and credibility that put one inside the boardroom. It comes as no surprise that even the small number of women who have “made it” prefer to downplay the role gender had in their success. Most regard the position as something they achieved because they proved that they could get the job done. 

This article was first carried by Forbes magazine. 

Yan (Anthea) Zhang is a professor of management at China Europe International Business School, Shanghai, China. She acknowledges the assistance of Janine M. Coughlin and Hongyan Qu.

Unless noted, all data on US companies are from 2011 Catalyst census.

Board chairs of China’s listed companies are executive board chairs, and usually are the most important decision makers of their companies.