A major U.S. or European company decides to plunge into Asia. It rents offices, sends out its best people, hires a relocation company to settle them into new homes, starts marketing its services, and sends the whole board over to admire the results. Trouble is, within a few years the business makes no money. The expatriates, who went overseas on three-year contracts, are back home. The most able members of the local staff have moved on to better jobs. The least employable remain.
Today, that scenario is history. While multinational corporations (MNCs) may still be sending out expatriates to head up their Asian operations, Asia’s top finance jobs are going local. “If companies have a choice between an Asian CFO with global exposure or a Western expat,” says Kwan Chee Wei, Singapore-based director at Watson Wyatt’s Human Capital Group, “all else being equal, they’ll tend to go for the Asian. [He or she] is more likely to understand local markets and people and therefore add greater value to the bottom line.”
The reason for this about-face is not hard to find. In the last few years, talented Asians with overseas degrees have increasingly found opportunities for advancement and growth back home just as appealing as those in the West. The supply of quality Asian finance executives has increased. Meanwhile, head offices are getting tougher about the returns they expect from their far-flung operations. With an increased emphasis on profitability, the number of companies willing to offer plush Western-style compensation packages has decreased markedly.
In fact, MNCs have been cutting back on expatriate perks and benefits since 1997. The current economic downturn has accelerated the trend. That’s why traditional expatriate remuneration packages are dead or dying, according to this year’s CFO Asia Compensation Survey, undertaken with consulting firm Watson Wyatt. In Singapore, for example, only 18 percent of the companies surveyed offered expat packages. In Hong Kong, the classic expat deal has almost vanished.
Their demise is understandable. Expat terms traditionally include housing and cost-of-living benefits, but can extend to private school fees, business-class travel home annually, a car and even a driver, amounting to an additional 10 to 20 percent over local pay levels. “Most companies here no longer pay a premium for expats,” says Watson Wyatt’s Hong Kong-based managing director Paula DeLisle. “Those who wish to remain in the job market here have accepted that the days of special preference are gone,” she says.
Meanwhile, compensation levels have not dropped to the lowest common denominator. Premium compensation and benefit packages for a favored few Westerners may no longer be the norm, but the demand for quality finance executives willing to work on local terms has produced rising salaries. In Hong Kong, regional finance directors received, on average, US$191,667 in 2000, up 11.5 percent from US$170,000 in 1999. In Singapore, salaries rose 12.1 percent, from US$146,000 in 1999 to US$166,107 in 2000 for the same position.
Even in the Philippines compensation was up from US$50,000 in 1999, to US$64,504, a 22.5 percent jump up. Compensation packages in Korea, Malaysia, and Taiwan remained stable. Perhaps the best location for the ambitious CFO is China. “As the country’s entry to the World Trade Organization nears, it’s drawing the best CFOs with increasingly competitive pay,” says Watson Wyatt’s DeLisle. Indeed, a senior finance manager based in China now earns US$97,000 compared with US$20,071 in Indonesia or US$65,504 in the Philippines, and is not far from closing the gap with Taiwan at US$109,384. Those salaries, increasingly, are going to Asians.
In the last 18 months, says Hong Kong-based Dan Chavasse, director at executive search firm Michael Page, companies seeking to fill a senior finance position are asking: “Why should we pay good money for someone who has no understanding of how business is done in Asia?” What’s hot in the recruitment market, he says, “is an overseas-educated finance executive with MNC experience and an Asian surname.”
Ponch Poon knows this. Raised and educated in Vancouver, the Hong Kong-born Poon returned to Asia in 1993 to work for a local bank. “My long-term plan is be where the action is, in Asia. Bean-counting isn’t a value- added skill anymore,” he says, “but business and finance exposure in Hong Kong and China is.” He has since moved from banking to take several CFO positions with MNCs based in Hong Kong and Guangzhou. “My grand strategy,” he explains, “is to build up experience in a Western MNC environment and at the same time gain exposure on how business is conducted in China. For companies that want to be successful in the world’s biggest market,” he adds, “finance executives with my kind of knowledge will be invaluable.”
Elsewhere in Asia, this “invest in yourself” trend is also evident. Take Teo Moh Gin. When Teo began his career in 1983, it was obvious that inequality, in terms of skill sets, gave foreign talent the edge in securing upper management positions at many companies doing business in Asia. “Singapore was once a very small market,” he says, “and I knew that to make a mark I had to gain broad-based geographical and industry experience.”
Teo spent the next 17 years gaining global experience in finance, business development and consulting at companies including Arthur Andersen, with stints in Hong Kong, Malaysia, and Africa, and the Government of Singapore Investment Corporation in San Francisco and Germany. The resulting combination of Western know-how and Asian cultural understanding, according to many recruitment experts, makes Teo more attractive than a Western candidate with equal experience. It also makes Teo pretty much recession-proof.
It doesn’t mean, however, that he’ll make all the right decisions. In September 2000, Teo accepted the CFO position at Singapore’s Sesami.com. “I wasn’t looking to leave my last position,” insists Teo, “but offers come in all the time.” Working for an Internet company in the current environment could be seen as a step backward, but Teo remains optimistic. Despite revenues of just US$7 million in 2000, no profits, and a global slowdown, Sesami has US$38 million in the bank and solid, well-connected backers, including Singapore Telecom, Jardine Matheson and Swire Pacific.
And if the company goes belly-up, he’s not worried. The 42-year-old Teo says that going abroad is no longer necessary to further his career. “Singapore companies have matured. At the very least now they have a regional view,” he says, “if not a global one.” Teo adds that at the same time, more MNCs have based their headquarters in Singapore. “So for me,” he says, “finding a finance role with regional scope can be done at home.”
On the flip side, job-hunting for the foreign-born CFO is getting tougher. Scotland-born Robin Arrowsmith learned this first-hand when he found himself between jobs last October. “There were a couple of good offers,” says Arrowsmith, “but with many companies it’s clear that an expat is no longer wanted. It’s not that the compensation package for a Westerner or Asian is any different, but a lot of companies, both regional and MNCs, believe that future growth is based on having local executives.”
The 35-year-old Arrowsmith had high hopes when he arrived in Hong Kong in 1991, spending the next five years as a senior consultant for PricewaterhouseCoopers (PwC). Through former colleagues at PwC, he secured the financial controller’s position at First Pacific Davies. Two years later he transferred to the Philippines as CFO for First Pacific’s shipping division. Last year Arrowsmith felt it was time to move on. “The Philippines isn’t exactly a finance center,” he says, “and after three years there I was beginning to feel out of the loop.”
After several months of job hunting, Arrowsmith finally landed a job as the Hong Kong head of finance for UK-based legal firm Freshfields Bruckhaus Deringer. Like many Western expats with a decade or more in Asia, Arrowsmith had no desire to return to Europe. “The longer you spend here,” he says, “the less chance you have of finding a position, for example, in London. It’s also less likely you’d want one.”
Freshfields, like many legal firms in Asia, has British roots and a large number of Western employees. Still, Arrowsmith’s pay package, like most today, is local, with no perks. Even so, he considers himself fortunate. Freshfields offers a bigger role, he explains. In Manila he was in charge of domestic operations only. At Freshfields he has responsibility for finance operations across the region. But expat- friendly companies like Freshfields are the exception as the market shifts to a preference for homegrown talent.
Arrowsmith believes that the “hire local” policy in Hong Kong could be short-sighted, however, particularly for companies with regional operations. “In countries like Thailand, Japan, and the Philippines,” he says, “people prefer to deal with a Westerner whose cultural nuances are accepted as foreign, rather than a Hong Kong Chinese who may come across as culturally intolerant.”
Paul Lyons, managing director at executive search firm Ambition, agrees that foreigners can still play important roles in Asian companies. Some prefer Westerners, he says, because they don’t carry any cultural baggage in places like Thailand or Indonesia. “Also,” he says, “at some MNCs, management at headquarters in New York or London sleep easier with one of their country’s nationals holding the senior position in Asia.”
Of course, the same thinking often applies to a Japanese or Chinese company with operations in the U.S. But trust, says Singapore-based Peter Tobin, managing director at human resource consulting firm DBM, should be tempered with caution: “A lot of highly paid Western professionals are brought in to companies in Asia to reorganize and restructure. Regardless of their skills and experience, expectations and performance don’t always meet.” Adds Tobin, “In some cases, people are hired for their technical skills and fired for cultural fit.”
Where’s the Money?
Indeed, for the few Western CFOs in Asia that still receive hefty expat compensation packages, the pressure to deliver is heavy. At Singapore’s Chartered Semiconductor Manufacturing, several senior management positions are occupied by Westerners, including Barry Waite, the company’s president and CEO. Waite’s paycheck last year included a base salary of US$538,000, allowances of US$267,000, and an annual bonus worth US$4.4 million, based on Chartered’s record performance in 2000 with after-tax earnings of US$244.8 million — its first profit since 1997.
Since then, the company has suffered from the global slump in the chip market and Waite, along with the rest of senior management, have cut their bonuses and basic pay for the year. No one is saying Waite’s job is on the line, but with such a high salary, he stands out. “In good times or bad,” says company CFO Chia Song Hwee, “we expect a hell of a lot more from expat staff. Local executives are arguably technically competent, but still lack exposure. So we’re willing to pay a premium for foreign talent, but in return, expectations are high in terms of performance and knowledge transfer.”
For most MNCs in Asia, Western expat staff are given a two to three year mandate to pass on their knowledge and experience to local staff, and then return to headquarters. The policy at Chartered, says Chia, places much the same emphasis on succession planning. “In an uncertain business environment,” says Shanghai-based Johnson, an analyst at human resource consulting firm Hewitt Associates, “as companies merge, consolidate or restructure, one of the biggest objections MNCs have is the high salaries of Western expats. The thinking is that the sooner a replacement can be trained, the better.”
That policy meets no objections from Seoul-based Jaehoo Song, CFO at U.S. networking equipment company 3Com. Song, 42, has spent his entire career picking up experience and knowledge from expats working at MNCs, like Dow Chemical and 3Com, with operations in Korea. Last March, the US$2.8 billion company announced a global restructuring exercise, spinning off Palm, its handheld computer division, and focusing on the broadband Internet market in Japan, Hong Kong and Korea. “We used to have some expats here,” says Song, “but now the workforce is all local.”
Even so, Song never considered moving to a Korean company. “Compared to local companies,” he says, “multinationals offer better money, more participation in decision-making and faster opportunity for advancement.” His next goal is to find a position in the U.S. — it’s a good place to educate his children, he says. Ultimately he plans to return to Korea. Experts say this kind of multinational career is becoming the norm.
“More and more frequently, says Michael Page’s Chavasse, “we’re seeing regional CFO roles filled by Asian returnees.” Many are born in the U.S. of Asian parents. “Am I an expat?” asks Winston Hsia, whose parents emigrated from Taiwan to the U.S., where he was born. “It’s a tough question. I consider myself more American than anything else, but really I’m comfortable with U.S. and Chinese cultures,” he says.
Born in Boston, the 35-year-old Hsia boasts an M.B.A. from the Wharton School of Business. After graduation, he spent the next seven years in investment banking in Hong Kong and New York. In 1998, Hsia became a co-founder and CFO of 01 Inc, an online banking exchange based in Korea. In March 2000, he left 01 Inc. after a disagreement with his partners, though he still retains shares in the company.
Through a family connection, he became CFO for Nasdaq-listed GigaMedia, a broadband Internet service provider, and China Network Systems (CNS), a digital cable operator, both based in Taipei. Both companies are also part of the privately held Koos Group, one of Taiwan’s largest conglomerates with interests ranging from financial services to cement. Hsia’s jobs at Giga and CNS are just as diverse. Initially brought into the group on a temporary basis, he is now in charge of finance and operations, business development, funding, corporate planning, and partnerships. Hsia has his work cut out for him. GigaMedia last year lost US$48 million and expects to lose about US$40 million in 2001.
In April, the company retrenched 25 percent of its workforce, and Hsia’s preparing a new business plan to get the company back on track to meet its profit forecast by mid-2002. Fortunately, he has help from deputy CFO, Joseph Shea. Like Hsia, Shea attended Berkeley and worked at Lehman Brothers in Hong Kong. “The Koos Group is a family business,” says Hsia, “but there aren’t enough Koos to fill every position. The company is staffed with professional management, especially in finance and accounting.”
Most of these are Asian expats. Like many other Asian finance executives who have returned, Hsia feels he’s arrived in a place that’s full of opportunity. “For me, the adjustment was easy, though it may be tougher for other expats,” he says. “I’ve been back in Asia nine years and don’t plan to go back to the U.S. Once this job is done, I still have a lot of wood to chop.”
Salaries in China
As China’s entry to the World Trade Organization nears, it’s drawing the best CFOs with increasingly competitive pay, says Watson Wyatt’s Hong Kong-based managing director Paula DeLisle. And as China’s back door, she adds, Hong Kong is riding the wave. “The talent always follows the money,” she says, “and there’s noticeable brain drain from other regions to the north of Asia.”
Indeed, an expat senior finance manager based in China now earns US$97,000, compared with US$20,071 in Indonesia and US$65,504 in the Philippines, and is not far from closing the gap with Taiwanese regional heads of finance at US$109,384. Singapore still looks attractive, with salaries up from US$146,000 in 1999 to US$166,107 in 2000, but Hong Kong’s top finance executives pulled in US$170,000 in 1999 and US$191,667 in 2000. Experts attribute part of this 15 percent growth in Hong Kong’s executive salaries to a growing perception that the Special Administrative Region’s close business relations with China is making the market for salaries there more competitive.
In last year’s survey, we reported that the glory days of the China expat package — including company cars and housing allowances — was slowly going the way of the abacus. That trend has continued. The comparative look at salaries for Chinese senior accounting managers reflects the change. Salaries for local Chinese staff have ratcheted up incrementally from year to year, but expat packages have declined marginally.
For more coverage of finance in Asia, visit CFO Asia (www.cfoasia.com).