In the past two months, CIMA has been writing about the Eastern and Western models of corporate governance and how the two approaches have held up during the recent global financial crisis. This article is the final part of the four-part series of articles, and focuses on case studies of Asian companies and their corporate governance structures and practices. The three enterprises are Singapore’s Banyan Tree Holdings, Japan’s Toyota and India’s Tata Group.
Banyan Tree Holdings
Banyan Tree Holdings, a Singapore-based leisure group, began life in 1994 when founder Ho Kwon Ping opened a luxury holiday resort in Thailand in a bid to move his family business away from contract manufacturing. At the time he was quoted as saying that was seeking a business that could be built on brand reputation and in an industry that would not easily be taken over by mainland Chinese companies.
Despite the crises that pounded Asia’s tourism industry, including economic downturns, the SARS epidemic and terrorism, the company quickly expanded its network of resorts, spas and hotels, eventually branching out into luxury consumer labels.
Banyan Tree became “one of the world’s most lauded luxury boutique-hotel brands,” according to the Wall Street Journal. Revenues in 2008 were US$293 million, down slightly from a record year in 2007, largely because of the closure of Bangkok’s international airport owing to political unrest. Revenues last year were US$231 million, as travel and tourism suffered from the crisis, but business this year is improving with the waning of the global recession.
Among its portfolio, Banyan Tree counts 27 resorts and hotels, 67 spas, 74 galleries and 3 golf courses in 23 countries, with plans to expand further over the next four years.
Throughout his tenure, Ho has managed with a very personal style, visiting with employees and customers regularly. In a 2008 column for Singapore newspaper The Straits Times, he wrote: “As East Asia emerges as a major economic region, it should not simply adopt the Anglo-American or European models, but create its own alternative. The common, recurring socio-ethical tradition of East Asia is its communitarian, family-focused webs of mutual obligations”.
“This communitarianism can, if thoughtfully enhanced, nurtured and developed, replace the highly individualistic Darwinian ethos of Anglo-American capitalism or the state welfarism of Euro-capitalism.”
He continued: “Of course, critics will argue that this neo-Confucian capitalism is compatible with crony capitalism, as the 1997 Asian financial crisis highlighted. They have a point. But the flaws of East Asian culture do not negate the need to develop a socio-cultural alternative to the Wall Street ethos. Indeed, they only make more urgent that East Asian thought leaders refine and redefine neo-Confucian values.”
Toyota is an interesting example of an Asian company that has run into recent problems – arguably because it lost touch with its traditional strengths.
Founded in 1933, Toyota became the world’s largest car maker by sales in 2008, overtaking General Motors in the process and building a 12% share of the global car market. It has long been regarded as one of the world’s most admired companies and has built a reputation for engineering excellence based on a philosophy known as the Toyota Way.
At the heart of this is a long-term approach to problem solving even at the expense of short-term goals. Through its development of such concepts as lean manufacturing and just-in-time inventory management, Toyota has had a profound influence on manufacturing throughout the world. With the Prius, it also created the first hybrid car, setting standards for others to follow.
However, more recently, its reputation has been tarnished by the recall of eight million cars due to mechanical failures, which US regulators believe have been responsible for over 50 deaths.