Can we start with an introduction to your background and your passion for cross-cultural communication?
‘Around 30 years ago, I studied at the Beijing Foreign Studies University, which has been the training ground for Mainland diplomats since 1949. My major was in English, with a focus on American culture and society. This formed the basis of my understanding of the Mainland and the West from a theoretical perspective.
After I graduated, I was fortunate to find a job with Bank of China, in its Overseas Business Management Department at its Beijing Headquarters. I was even more fortunate to be able to deal with regulators and businesses in various countries as part of my job. A perk, if I may say so, was that I had the chance to travel to many countries and experience different cultures first-hand.
Through my work and travels, I acquired practical knowledge and became acutely aware of the need for good cross-cultural communication to foster understanding and avoid mistakes. I then studied for my MBA at the University of Toronto. My professors and classmates came from different cultures and diverse backgrounds. Two years of full-time study and living in Canada further enriched my day-to-day communication skills.
By 2004, when I returned to Bank of China, I was privileged to be part of the bank’s initial public offering (IPO) process as part of the national reform of state-owned banks. The bank became a limited liability company, with dual Hong Kong and Shanghai listings two years later, in 2006 and with that, modern corporate governance was first established at the bank. During the bank’s IPO process, I worked with a team of international lawyers, accountants and bankers, and handling cultural issues to bring the parties to the same level of understanding was important.
After the bank’s listing, I became its Head of Investor Relations and Listing Affairs Representative – a role that functions as the assistant to the Board Secretary under the Mainland listing rules. I attended over 500 meetings and roadshows with international institutional investors and key banking analysts for a decade.
Then, in 2016, the bank kindly gave me the chance to be the Board Secretary of Bank of China (Hong Kong) Holdings Ltd, which is the flagship subsidiary and regional headquarters of its South East Asian operations. So here I am, attending to Bank of China Hong Kong’s company secretarial work, managing its investor relations and facilitating communications with Bank of China, where compliance with national policies and local regulations are major concerns.’
Do you think there is a cultural gap between Hong Kong and the Mainland, particularly involving corporate governance practices?
‘We all know that Hong Kong is an international financial centre. When we talk about cultural differences, in my experience the gap that exists between the West and the Mainland is certainly wider than that between the Mainland and Hong Kong. Under the One Country, Two Systems framework, the Mainland and Hong Kong will continue to have different political, economic and legal systems, but the cultural gap is narrowing as the result of increasing communication and exchange.
The reality is that after some 40 years of open market reforms and developments, the Mainland has caught up and even surpassed Hong Kong in some areas – plenty of examples of that can be seen in the technology space. Also, there are many national policies that involve and impact Hong Kong. The One Belt One Road initiative, for example, has accelerated the Mainland’s open market reforms and the pace of entry of major state-owned enterprises (SOEs) into Hong Kong. As a result, the Mainland’s influence over Hong Kong is now far more significant, as evidenced by the fact that over 85% of our market capitalisation is Mainland related.
The competitive landscape in Hong Kong has changed with the increasing importance of Mainland enterprises and their talent pool in Hong Kong. There are still differences in governance practices and governance professionals need to manage this. Governance professionals are in a unique position to adapt to and facilitate Hong Kong’s transition through cross-cultural communication, and cultural sensitivity will be an important tool.
I would like, by way of example, to share some anecdotes of the key cultural sensitivities that should be adopted when dealing with colleagues with a Mainland background and SOE superiors. In this connection, I spoke to some of my colleagues who have worked for foreign, Hong Kong and Mainland employers. They shared with me many typical culture shocks they experienced and six themes, discussed below, emerge.
1. Mainland employers are not easy-going and Mainland colleagues lack a sense of humour
This is a common misconception caused by language problems. I have seen many easy-going employers and humorous colleagues in the Mainland. However, without Cantonese proficiency and the requisite cultural background, Mainlanders are reluctant to joke. They do not want to cross any lines and be perceived as being offensive or harassing.
2. Mainland employers are much too detail-orientated and have a very low tolerance of mistakes
This is true and is a result of the highly competitive working environment in the Mainland. Millions of university graduates enter the Mainland labour market every year and brutal competition is everywhere. In this context, working harder and smarter is the only way to survive the daily work regime and earn the chance of promotion. While it may be an exaggeration that most Mainland employees are perfectionists, most Mainland employers are perfectionist as many of them had the experience of serving perfectionist supervisors. Perfectionism is a critical virtue and passed on from generation to generation.
Perhaps the search for perfection and having zero tolerance for mistakes have contributed to the Mainland’s fast growth over the past decades. This may not resonate with Hong Kong’s corporate culture, but is a function of the social development and environment of the Mainland. It is simply a matter to be mindful of, while taking care to be detailed and prepared when working for Mainland employers.
3. Mainland employers’ emphasis is more on service experience than professionalism
Mainland employers do value professionalism, but they are more results-orientated. This is part of their mentality from their training and their experience of competition. Therefore, except for the provision of professional advice, Mainland employers tend to focus on providing stakeholders with a good service experience. In any event, only a perfect combination of professional advice and good service can best meet customer expectations and increase customer loyalty. Real professionalism serves the needs of employers and satisfies customers without breaching laws and regulations. This is why I strongly support the recent adoption of the Institute’s new name – The Hong Kong Chartered Governance Institute – which is conducive to the delivery of even better customer service to a wider customer demand for broader governance.
4. Writing reports is an exacting task in SOEs where high standards of written Chinese are required
This is true. Mainland companies, especially SOEs, certainly have high standards for Chinese written reports, just as foreign companies have high standards for written English in their reports, which most Hong Kong employees have grown accustomed to. SOEs also tend to require more formal reports. When writing Chinese reports, employees have to demonstrate their expertise and their ability to concisely discuss complicated issues. The reports should include all the key information, be persuasive and serve as evidence for future accountability and internal audit reviews, together with disciplinary checks and scrutiny from various external regulatory bodies. The documentary chain in Western and Hong Kong companies is also important of course, but such companies is to keep many emails and ancillary documents as evidence.
5. SOEs keep tight control of the length of board meeting discussions and the time allocated is usually insufficient
Many observers have noted the way in which many important items are dispatched with a consensus without much discussion and debate during board meetings at SOEs. Some therefore question whether non-executive directors are just acting as rubber stamps. This is an unnecessary concern caused by differences in corporate governance culture. Harmony is one of the core values of traditional Chinese culture. For Mainland companies, especially SOEs, the board meeting is the venue to reach consensus and to demonstrate unity, rather than being a forum for debate and voting. Usually, only when all obstacles and disagreements have been resolved, would an item be brought to the board room. I have seldom seen votes being cast against a proposal or an abstention. This is not due to the Chairman’s dictatorship, but because consensus has been reached beforehand. If a decision is imposed on anyone by simple voting, there is a risk that the decision may not be faithfully implemented with enough cooperation.
In respect of foreign companies, the position is the opposite. Almost all issues are resolved at the table through open debate, but the risk is that the items may not be approved as scheduled. If there is no consensus and a decision has to be made, there could be a casting vote as the final solution in some situations. This is exactly the face-off scenario that Chinese companies do their best to avoid.
Moreover, senior managers of large companies need to attend many meetings and functions daily. Similarly, SOE leaders have many important commitments with local and central government officials. So their calendars are usually fully occupied without flexibility. It is understandable that SOE leaders have strict meeting time control. Therefore the necessary communication for making proper decisions would have been communicated prior to the meeting and board meetings tend to be short.
6. The reporting procedure to an SOE’s parent company is too formal, long and slow
This is true. Large SOEs have complicated organisational structures and check-and-balance systems. These are the result of the long-term influence of government and anti-corruption campaigns. From my experience, however, this is improving as the Mainland continues to open up, and SOEs become more market-oriented and efficient. State-of-the-art management theories are gradually being introduced and implemented, and international talent is increasingly being recruited from the market.
In summary, there are many cultural differences between Hong Kong and Mainland companies, especially SOEs. There is no right or wrong and the point is to seek to understand cultural differences and for the governance professional to facilitate cross-cultural communication.’
How can the governance professional support Mainland employers and colleagues, in particular by facilitating effective cross-cultural communication?
‘Effective cross-cultural communication requires an attitude of respect for the culture of your counterparts. It helps to learn about their cultural concerns, but if you do not have time for that then at least drop any bias you may have against the other culture. Also, try not to interpret anything that you are not familiar with based on your own cultural concerns. You should focus on common interests and goals for effective cross-cultural communication.
You need to be patient and tolerant and avoid magnifying minor problems caused by cultural differences. It is also useful to learn the language of your counterpart to better express and understand each other, and for meaningful understanding of cultural concerns. In any event, try to listen carefully, with patience, speak slowly and with honesty, and avoid using slang terms. It is equally important for you to introduce your cultural concerns to your counterpart. Out-of-office informal chats are often more effective than formal conversations in the business environment. A pleasant talk over dinner can establish friendship quickly. However, sensitive topics such as politics should be avoided in most cases.
To share my own experience, when I started working as the Board Secretary and Company Secretary of Bank of China Hong Kong in 2016, I found that my local colleagues could understand less than half of my Mandarin and vice versa. I forced myself to learn Cantonese by attending classes, listening to the radio and news broadcasts, and watching TV soaps and movies. I have tried my best to speak Cantonese with my colleagues on a daily basis. With the support of my local colleagues, I made a short public acceptance speech for a Hong Kong Economic Journal award after six months and moderated our bank’s annual general meeting in Cantonese after one year. I can now communicate with my local colleagues in the office with fluent, albeit not perfect, Cantonese. I may not be able to express all my thoughts in Cantonese, but with my Hong Kong colleagues’ acceptance, this has greatly improved the efficiency and accuracy of our communication and lowered the chances of misunderstanding.
It is through our communication both in and out of the office that my colleagues and I have learned about our respective cultural backgrounds. My personal advice is – don’t be shy and never give up. As long as you show your willingness and determination to cross cultural barriers, that will be a pathway for effective communication.’
How important is it to be aware of the Mainland’s national plans, initiatives and policies?
‘I would say it is very important, as without understanding these, governance professionals will not be able to understand the concerns of Mainland counterparts. As we all know, the Mainland has risen to be the second largest economy in the world.
As such, its national plans, strategic initiatives and policies have more impact on the world than ever before. As Hong Kong is the bridge linking the Mainland to the outside world, for its own prosperity it needs to have closer integration with the Mainland and to better serve its national development. This trend requires everyone to be aware of the Mainland’s national plans and policies without preconceived bias. Better understanding of the policy concepts, goals and roadmaps of these national plans and policies can help governance professionals mitigate policy risks and capture the opportunities they offer.
I recently read a good background analysis of the Mainland by an international investment bank. The analysis traced recent regulatory measures targeting tech and property firms, education, gaming and crypto assets to the concept of ‘common prosperity’, which first appeared in an inaugural speech of President Xi Jinping back in 2012. ‘Common prosperity’, along with the new development model, the 14th Five Year Plan, the One Belt One Road initiative, and the Greater Bay Area Development Plan, certainly deserve attention and study by governance professionals.
Governance professionals would also do well to understand the implications of policy changes and regulatory enforcement in the Mainland. This usually follows a three-step approach. During the first stage, the Central Government announces the direction of policy changes and encourages open debate in the media to test the water. During the second stage, relevant laws and regulations are promulgated but not strictly enforced, or are implemented on a pilot basis to leave room for transition. At the third stage, regulators begin to strictly enforce the laws and regulations.’
Kenny Luo FCG FCS was interviewed by Mohan Datwani FCG FCS(PE), Institute Deputy Chief Executive, at the Institute’s Bridging the Cultural Divide – Practical Sharing webinar held on 2 November 2021.