Why Fashion’s Boardrooms Don’t Reflect China’s Importance

When Coach’s parent Tapestry named Alan Lau to its board of directors last month, the company cited the Tencent alumnus’ deep knowledge of the China market as an “invaluable asset.” A few months earlier Ralph Lauren Corp chief executive Patrice Louvet appointed Wei Zhang, former president of Alibaba Pictures, to its board, praising Zhang’s “knowledge in international operations — in particular Asia.”

The two companies are in the minority as few of their luxury peers have Chinese representation at board level. Across the wider fashion industry, such appointments are few and far between.

According to the Ethics & Boards Fashion & Luxury Index, which examines the board composition of the 50 largest listed fashion and luxury companies in the world, only 30 percent have at least one board member of [mainland] Chinese, Hong Kong or Taiwanese [background] or of Chinese descent.

“This does not include non-Chinese board members who have a long professional experience in China or Asia-Pacific,” said index founder Floriane de Saint Pierre, a well-known executive recruitment advisor in the fashion industry and founder of Floriane de Saint Pierre & Associés.

Of the three dominant luxury groups — LVMH, Kering and Richemont — only one currently has a Chinese director. Jin Keyu, an economist and daughter of prominent banker-politician Jin Liqun, was appointed by Richemont in 2017.

In 2020, Kering named Jean Liu, president of Didi Chuxing and daughter of Lenovo founder Liu Chuanzhi, to its board but she stepped down last year after the Chinese government fined the ride share company for violating cybersecurity laws. The dearth of Chinese board members in luxury is particularly conspicuous as the China market accounts for a third of global luxury revenues and Bain & Co forecasts that it will contribute roughly half by 2025.

At least two companies in the beauty sector have two Chinese representatives each. Wei Sun Christianson, a senior advisor at Morgan Stanley, and Angela Wei Dong, head of Nike greater China, are both on Estée Lauder Group’s board. L’Occitane International, which maintains a second listing on the Hong Kong Stock Exchange, has two Hong Kongers on its board — former Bloomberg anchor Betty Liu and Jackson Ng, who has been with the board for going on 13 years.

However, large groups like L’Oréal, Coty, Prada, Burberry, Luxottica, PVH and Capri currently don’t list anyone Chinese (though some previously included members from Hong Kong or the mainland). And while China remains a large market for Nike, H&M and VF Corp, none of these include Chinese board members either.

“Demand for board directors with international experiences is rising, but I think the demand for foreign nationals is still relatively low,” commented Kyle Rudy, senior partner at Kirk Palmer Associates, a global executive search firm focused on the fashion, retail and beauty industries.

The diversity gap doesn’t only apply to Chinese nationals but reflects a wider reality of multinational fashion companies filling their boardrooms with people from the same nationality as the company headquarters. Uniqlo parent Fast Retailing only lists Japanese nationals, Inditex is overwhelmingly Spanish and other Europeans and LVMH’s is mostly French.

The business case for diversity in leadership teams is well documented with McKinsey research showing that companies with diverse executive boards enjoy significantly higher earnings and returns on equity. Aside from this and the ethical imperative for increased diversity and inclusion across the workforce, China’s size and complexity demand nuance and cultural acumen on a different level.

Controversies in China can quickly snowball into nationwide brand boycotts and companies must also juggle the influence and sometimes direct intervention from government authorities. As Rudy put it, China involves “an entire vector of global and cultural complexities that we don’t normally consider when we talk about corporate diversity and inclusion, and care. There are so many more barriers to communication, language, time zones, values and customs.”

Given how business in China prizes guanxi, or relationships, Chinese board members with strong political and corporate connections can be a powerful tool. In the last few years, foreign firms are reporting a more hostile operating environment, often tied to geopolitical tensions between the Western countries where they are based and China. In theory at least, local board members can help firms navigate these and other tricky pain points.

But other than guanxi, ‘cultural IQ’ and location-based expertise, Chinese board members can also bring important experience in other areas, such as China’s unique digital ecosystem which is in some ways more advanced than in the West.

“If you look at the backgrounds of both Alan and Wei (the recent board appointments at Tapestry and Ralph Lauren), they’re not just China experts. They’re also digital experts,” said Rudy. “I think [Western fashion and luxury companies working to establish a greater presence in China] are recognising a need for leaders… [on] both fronts.”

Alan Lau makes for the second Chinese board member at Tapestry after Annabelle Yu Long, who has served for the past seven years. Wei Zhang, a US national, is Ralph Lauren’s sole serving board member of Chinese heritage.

While LVMH and Kering both have Chinese nationals in powerful regional positions — Andrew Wu since 2005 has served as head of LVMH greater China and Cai Jinqing in 2019 joined Kering as greater China president — they are roles that don’t typically have a bird’s eye view of a firm’s total activities. LVMH and Kering did not respond to BoF’s request for comment on the composition of their boards.

With the Chinese market now recovering from the impacts of the pandemic, Chinese membership in the boardroom might be more front of mind for some global fashion companies, experts suggest.

“The pandemic certainly had a negative impact on hiring board members located far from the headquarters,” said de Saint Pierre. Not only were companies reluctant to hire someone without having met them in person but if they were hired, it was difficult for those members to make meetings. “Some listed companies, such as Kering, had a Chinese board member in past years but faced low attendance rate for sure due to the pandemic.”

During the first two years of Covid-19, mainland China’s closed borders meant that although life functioned fairly normally within the country, going in and out for business trips even to Hong Kong required two weeks of quarantine. The past year however, when the Omicron variant overwhelmed the government’s zero-Covid containment strategy and forced entire cities into severe lockdowns, many foreign executives reached breaking point and sought ways to leave the country.

Some believe that this exodus of foreign talent could inadvertently end up helping Chinese candidates in the medium to long term climb the corporate ladder to the upper echelons of management and eventually board rooms. However, others suggest that the return of foreign executives with China experience to company headquarters could edge out Chinese nationals at group level.

“In markets such as mainland China, the pandemic accelerated opportunities for Chinese to step up into P&L and senior positions when foreign executives wanted to leave due to the strict extended lockdown,” said Grace Nida, managing director for the global luxury sector at executive search firm Korn Ferry. Successfully managing the profit and loss of a business unit is an integral skillset that corporate executives need to demonstrate before graduating to the next rung.

Chinese and some other Asians face a pipeline challenge, suggested Nida, who is Asian American. Although China has a dense talent pool dating back to the 1980s of people leading companies in certain industries, it is not typically the experience that is prized by fashion firms. Only in the last two decades did China’s consumer economy really flourish, and it can easily take two decades for an executive to reach the senior ranks before finally making the jump into a multinational board.

“It is a question of time. As more Asians gain global experience, they will become more qualified to serve on boards as well as manage P&Ls,” she said.

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