The CFO Rising South-East Asia conference was held in Singapore on 16 November 2006
Mr Nair was a panellist at the “CFO Rising South-East Asia Conference: South-East Asia and the Global Challenge”, held in Singapore on 16 November and run by CFO Asia, publishers of the monthly magazine. The conference examined how chief financial officers were at the very heart of the complex task of building a self-sustaining growth strategy in the region’s challenges, risks and opportunities.
In a panel discussion titled, “Leadership in the CFO perspective”, Mr Nair discussed how changes in traditional businesses and the advent of China and India have imposed the need on CFOs to take on a leadership role for their businesses to be successful regionally. He explored whether new leadership models were emerging “in the pressure cooker of business in the region”, with Douglas Werth, Philip Morris International’s vice president of finance, business development and planning for Western Asia, and Ravikumar Krishnan, the chief financial officer of Olam International.
Mr Nair said leadership had become an “over-hyped mantra”. While this was not to say leading and being a leader were unimportant, Mr Nair said, “The notion that there are these great business leaders who have single-handedly changed their companies is modern-day myth-making.” He said there is a need to understand that corporations need people to lead right across the organisation, and there is too much emphasis on creating a core group of elite leaders.
His attitude was more down to earth – an approach that built up from first going back to basics, and asking, “What is leading?” This, he said, was as simple as doing your job well and being efficient. Most important for those responsible for other people, such as employees, shareholders, and stakeholders, was to create value, not just short-term financial value but also create the foundations for the community within the business to thrive, enjoy work, be fairly rewarded whilst appreciating the competitive nature of the world of business. He expressed the view that a key role of leadership is to be inspirational and fair.
For financial chiefs, Mr Nair said, this meant a particular kind of person was needed to fill the position: one who refused to be bullied, and who would not intimidate or be intimidated. While these traits were ideal, few large companies had the openness and culture that allowed individuals who displayed them to flourish. The main reason was an unfortunate competitive environment created supposedly to drive companies – but which actually created tensions within a company that few are able to manage well. He said it was vital that modern companies were able to confront these realities (what he called tyranny) and then open the issues for discussion.
Other areas that were important in understanding and practising good leadership were:
- Understanding you are not the only one responsible for making things happen; and retaining a very healthy dose of humility.
- Being aware that good technocrats did not necessarily made good leaders. Mr Nair said that far too often good technocrats were masquerading as leaders in many large MNCs; they had limited leadership skills, and this was damaging. He impressed how important it was that good managers had to be good leaders – and vice versa.
- In a complex region such as South-East Asia there is a need for more open and honest dialogue within corporations about how people are appointed to so-called leadership positions: there is a widespread view among the Asians that they are not well represented, and there are barriers to their making it to the top. It was no different for many finance chiefs. Where Asian CFOs are in place, very few feel they have the power of authority to truly be “leaders”, even in their region: “This is a lament I have heard often,” Mr Nair said.
- In addressing whether CFOs have a leadership role to play, Mr Nair was firm: “Clearly, the answer is ‘yes’ – but then the question to ask is, ‘What role is that?’” The parameters of this role needed to be very clearly defined, especially since the foundation of the role is for CFOs to “maintain the integrity of the books”. This sits just ahead, not alongside, the traditional one of driving the business through prudent financial management ensuring sound business decisions are taken (for example in mergers and acquisition deals).
- Too many CFOs are the “handmaidens” of chief executives, beholden to them instead of having independence and authority within their own roles. This compromise is tied directly to the financial chiefs’ pay: the role of perverse incentives that may influence CFO leadership decisions should not be underestimated, he said. De-linking their compensation from the financial performance of the company was vital to making headway.
- Very few Asian CFOs are willing to challenge their western bosses, even though they may have better insights and alternative solutions to particular issues. Mr Nair asked which CFO in a developing country would be willing to suggest that globally designed bonus plans are unfair or that transfer pricing could be argued to be an unethical business practice, though it is well accepted by the global accounting firms, or point out the disparity in salary packages between expatriates and locals when looking at cost efficiencies?
Mr Nair said the situation was dysfunctional, holding back CFOs from what was fundamental and critical in their roles. This, he suggested, was rooted in colonial attitudes, Asia culture, misplaced nationalism on both sides, and the fact that many people in these roles are not the most open of communicators. “It corrupts the integrity of leadership frameworks,” Mr Nair said, “and this can often put the wrong people in supposed leadership roles.”
Opening remarks to the conference were made by Jan Friederich, senior economist of global forecasting with the Economist Intelligence Unit focused on “South-East Asia and the global outlook”.
Dr Friederich said there is a moderate global slowdown after buoyant growth, but the risk was a sharper-than-expected slowdown in the United States. Asean, on the other hand, showed strong but varied growth prospects, with its main challenges in the form of China and its investment environment.
In a follow-up question and answer session and discussion panel, “The CFO dialogue”, financial chiefs considered the keys to building a self-sustaining growth strategy, taking into account the region’s challenges, risks and opportunities.
Other panel discussions were on “Overcoming the productivity challenge”, “High performance finance in South-East Asia and Australia”, “How global is your treasury centre?”, “Converting HR to gold”, and “Governance, ethics ad Asia’s finance leaders”.