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October 23, 2008

Living Laboratory for Asian Executives

Catherine New
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Nothing gets past a Manhattan doorman. Not even 25 CEOs from Korea, collectively representing one-fifth of the nation’s GDP. As part of their weeklong visit to Columbia Business School, the group visited the famously white-glove Metropolitan Club for an event hosted by GC Andersen. The establishment has but one rule: everyone must wear a tie. Unfortunately, no one in the group was wearing one.

However, the tie-less executives cheerfully divvied up the backroom emergency stash — paisley and all — and proceeded to the special event in high spirits. The moment, noted faculty director of the Korea CEO program Prof. Cliff Schorer, exemplified the warmth and flexibility that they displayed during their stay.

In mid-September, two groups of high-level executives from China and Korea completed Executive Education courses in general management, conducted site visits and networked with US executives and each other. Asia’s growing role in international finance has brought an increasing number of executives to American universities to learn how to sustain and scale their own economic growth, and how the US economy impacts their own. Columbia Business School has partnered with the Cheung Kong Graduate School of Business and Global Education Network to offer different types of programs for those executives.

For both groups of CEOs, the coursework — which bridged practice and theory — had historical implications as their final week of classes, held in New York City, coincided with one of the most tumultuous weeks in Wall Street history.

Economic Insights

Prof. Wei Jiang, responding to the week's news, gave a presentation to the Chinese CEOs and discussed the impact of the current financial crisis on Asian markets. She placed the crisis in a historical long-cycle context and offered insight on what is new to this crisis. Using the example of Morgan Stanley’s reported real estate offering in Shanghai in early September, Prof. Jiang considered how the current financial crisis is different than the crisis in 2001.

“Now they are looking at their balance sheet, and suddenly those assets they hold in China become their most sellable assets,” said Prof. Jiang. “Because the foreign investment in China are real [estate] assets and are a relatively new phenomena, China doesn’t have any experience with the contagions of financial crisis through the asset sales channel.”

Understanding the economic implications of the trade imbalance was also of interest to the group and part of the group discussion, she said.

“The real reason for a trade imbalance is a fundamental imbalance in savings behavior. In the end, a country that consumes more than it produces will import from a country that produces more than it consumes,” she said. “In the US, they worry that people don’t save. In China, they have the opposite headache, and people don’t spend.”

Management Style

Another area that was covered as part of the Chinese CEOs’ course work was cross-cultural differences in management style. Prof. Joel Brockner, faculty director of the China CEO program said differences in management style were less important than how they are managed and discussed. For example, the issue of “power distance” differs between American and Chinese management styles.

“You read a lot about employee involvement and how you need to involve them in decision making. That’s a Western principle,” said Prof. Brockner. “In China there is not the same feeling. People at the bottom aren’t expecting or wanting to be involved in decision-making. We are preaching involvement as our management style and we assume low-deference to authority. But in China there’s more high deference.”

“Asian businessmen tend to be more introspective,” said Prof. Schorer. “They absorb, consider and ponder versus shooting from the hip.”

Global Vision

On the morning of Sept. 29, the Korean executives had an unexpected surprise: a site visit to the New York Stock Exchange with NYSE president Gerald Putnam became front-row seats to the biggest single-day drop in Dow Jones history.

The timing of the visit, coming at the height of chaos in the financial markets, generated much stimulating discussion according to Prof. Schorer. The US market collapse in 1987 (25% drop in one day) and the subsequent Asian financial crisis were both really confined to an identifiable geographic region. It was an eye-opener to see how immediately this crisis spread, and how the domino effect, caused by the subprime debacle, spread fear and reaction around the world so quickly, Prof. Schorer said.

Wall Street’s role as the center of global finance was also the focus of discussion in a special class session with Prof. Ray Horton, who gave a presentation to both groups of CEOs on the changing distribution of global power.

He asked the groups to consider what the world’s distribution of power will look like in 20 years and whether the world would have one, two or more poles of control. Breakout groups debated and then assigned probabilities to all the type of international power structures. Both the Chinese CEOs and the Korean CEOs were split between a unipolar world, with either the US or China leading (usually the US), or a bipolar world, with both China and the US, said Prof. Horton.

Their conclusions mirrored the overall tenor to the visit.

“The Korean CEOs had a global vision and a heightened recognition that we’re seeing how integrated we’ve become,” said Prof. Schorer. “We’re all now related in this web of commerce and investment.”

Photo credit:Courtesy of Executive Education