My contribution to a board
Most boards of Chinese manufacturers now include directors who understand finance, law and the home market. Fewer include someone who has spent a career selling to exacting foreign customers from inside China, and who has had to change how a company works because of foreign law, currency and suspicion. That is what I would bring.
I can help a board judge three kinds of decision that companies going abroad tend to under-price. The first is currency: whether contracts and costs leave the company carrying risk it has never written down, and who should carry it instead. The second is jurisdiction: which customers' legal positions, on data, export controls or supply-chain rules, will decide where the company may make, store or service things, and how early it should design for them. The third is trust in a market such as Japan, which is earned slowly through how a supplier handles problems and lost quickly through how it hides them.
I would also bring the experience of a chief executive who has disagreed with significant shareholders on paper and kept working with them: a private equity investor over the listing venue, a municipal fund over moving work out of Dalian, and the founder's own preferences more than once. Independent directors in founder-led Chinese companies need that discipline, with less information than an executive has and more distance from the outcome.
I would not bring the accounting expertise an audit committee chair needs, and I would not offer to chair one. I can read a set of accounts and challenge revenue judgements on long contracts, which my own business has taught me, and I would serve as an ordinary member if asked.
Judgement in practice
01Benchmarking a shareholder-client's rates in the open
Before our listing, Kurobane Systems was both a 14 per cent shareholder and a client providing about 9 per cent of revenue, and I had worked for its Dalian subsidiary. In 2021, when our first independent directors joined, I disclosed that history in writing and proposed that they review Kurobane's contract terms each year against those of our other seventeen largest Japanese clients. The first review found Kurobane's rates about 4 per cent below the median. Kurobane's nominee director argued that its volume and long relationship justified the difference. Our independent directors accepted part of that argument, and the rest of the gap was closed over two renewals. The prospectus later described the relationship, the review and its result. On another board I would ask for the same arrangement wherever a shareholder is also a customer or supplier: an annual benchmark, reviewed by people with no stake in the answer and documented before anyone needs it.
02Declining a subsidy that would have fixed our headcount
In 2023 a Dalian district offered Yanxiao RMB 48 million over three years towards training and office costs, on condition that we kept at least 7,500 employees in the city. Our municipal shareholder's nominee director supported the offer, and the money was real. I recommended that the board decline it. Japanese clients were already asking for delivery from a second country, and I expected European clients to ask for controlled work to leave China; a headcount condition would have forced the company to choose between a subsidy and its clients. The board declined the offer by a majority. The following spring, when our German client asked us to move about 150 roles, we could do so without a dispute with the district. As a director I would read the conditions attached to state support as carefully as the amount, because a condition can quietly take a strategic decision away from the board.
03Reporting a file-handling lapse before anyone asked
In January 2024 an internal check found that one of our project teams had copied 212 technical files from a European client into a Dalian project share without the classification check our contract required. Two engineers had opened them. I told the client's compliance head within two days and the chair of our audit committee the same week, and we asked outside counsel to establish what had happened. The client's own review found that four of the files required restricted handling, and it made its own decision about what to report to its authorities. We deleted the copies, logged every access and rebuilt the transfer process so that no file can reach a project share without a recorded classification. Two months later the client asked us to move its controlled scope out of China, and it stayed with us. On a board I would expect management to report an incident within days, with what is known and what is not, rather than wait for a complete picture.
My first year on a board
I would treat the first year as an apprenticeship with three tests.
The first test is whether I understand how the company actually earns money abroad. Before my first meeting I would ask for overseas results by country and customer, the currency terms of the ten largest foreign contracts, and any legal advice the company holds on data, export-control or sanctions exposure. Within six months I would visit at least one overseas operation, a plant, warehouse or service centre, and meet its local managers without head-office staff in the room.
The second test is whether I can ask useful questions without becoming a second layer of management. I would keep a written list of the questions I raised at each meeting and what became of them. If most were answered by papers the company already had, I would conclude that I had been asking the wrong ones.
The third test is whether the board has found me worth having. At the end of the year I would ask the chair, and the chair of each committee I sat on, whether my contributions had changed any decision or merely lengthened the minutes, and I would accept the answer. I would not seek to chair anything in that year, and I would not carry Yanxiao's methods in with me as though they solved another company's problems.
Conflicts and their management
My conflicts fall into four groups, and I would deal with each before accepting a seat.
Commercial. I would decline any board in IT services, software or outsourcing, any company that is a client, supplier or competitor of Yanxiao, and any Japanese systems integrator. Because Kurobane Systems is both a shareholder and a client of Yanxiao, its affiliates and competitors are excluded too.
Holdings and relationships. I would disclose my indirect holding in Yanxiao, my three Yanxiao directorships, my former employment with Kurobane's Dalian subsidiary and any family holdings, and I would ask the appointing company to check them against its own customers and suppliers. Yanxiao's board would need to consent before I accepted.
Information. As a director of one listed company I hold inside information about it; on a second board I would hold inside information about another. I would follow both companies' dealing rules, keep the two sets of papers apart and stay out of any discussion where Yanxiao's interests could be touched.
Time. Yanxiao's results calendar, my monthly week in Japan and a second company's meetings will collide. I would agree the year's board dates before accepting and reserve twenty-five days, including preparation and site visits. If a conflict arose after appointment, I would disclose it at once, leave the relevant discussion and offer to resign if it seemed likely to recur.
My independence statement
I am Yanxiao's chief executive and one of its executive directors, and I hold about 1.4 per cent of its shares indirectly through the employee incentive platforms. From 2012 to 2015 I worked for a subsidiary of Kurobane Systems, which is now an 11 per cent shareholder and a client of Yanxiao. I would join only a board where neither Yanxiao, Kurobane Systems nor I have a commercial, family or financial tie that a careful reader would question, and I would set out every tie I know of in writing before the board considers me. The Hong Kong Listing Rules and the CSRC's rules for independent directors of mainland-listed companies each describe how independence is assessed; whether I meet them in a given case is for the appointing board to decide.