China Yuchai GC Deborah Foo engineers smooth investor relations and new ventures for an organisation that stretches across four culturally diverse territories and spans activities from building engines to hospitality
Bridging the cultural differences between the company’s Chinese business and its foreign investors is an important aspect of Deborah Foo’s job as general counsel of China Yuchai International (CYI).
Foo has been leading the legal function at CYI, one of China’s largest independent diesel engine manufacturers, since 2007.
As if learning about the valve mechanisms of heavy machinery was not a mental challenge enough, Foo says the biggest challenge in her job lies in the group’s complex corporate structure.
It is not hard to see why. CYI is a Bermuda holding company listed on the New York Stock Exchange. Its main operating subsidiary is Guangxi Yuchai Machinery Company, headquartered in the city of Yulin in China’s Guangxi province. Guangxi Yuchai manufactures, assembles and sells diesel engines for construction equipment, trucks, buses and cars in China and overseas markets.
In stark contrast, CYI’s other main business is hospitality and property development. The operation is called HL Global Enterprises, a Singapore-listed company in which CYI holds a sizeable stake. In addition, CYI is part of Singapore conglomerate Hong Leong group.
As a result of the organisation’s complexity, Foo needs to oversee legal, regulatory and compliance issues across four main jurisdictions: Bermuda, China, Singapore and the US. Apart from her legal responsibilities, Foo is also in charge of CYI’s compliance, investor relations and company secretarial and corporate governance.
“You have to be on your toes all the time,” comments Foo. “When a matter comes up I have to think if we need to check with our US and Singapore lawyers or if it concerns Bermuda or China law. We also need to know if there’s a disclosure issue and how it might affect investor relationships.
“I deal with a wide range of matters – some of these matters people have never come across before. It always gives me different things to think about and that makes the job interesting.”
An eye-opening challenge
Foo joined CYI as general counsel in 2007 from Singaporean internet services provider Pacific Internet (now PacNet), where she served as vice-president for group legal and company secretary.
Prior to her joining, CYI’s legal needs were supported by the parent company’s in-house legal team. With Guangxi Yuchai’s growing business and increasing number of joint ventures and operations, CYI brought in Foo as its first dedicated in-house lawyer. However, she did not have the luxury of easing into her new job for a few months before her first major challenge came up.
The task involved an internal investigation into an accounting error in the 2005 annual report filed with the Securities and Exchange Commission (SEC) in 2006, which later triggered an inquiry by the US regulator. After learning about the erroneous entry of RMB168m (£16m), which was made by its Chinese subsidiary Guangxi Yuchai, CYI’s audit committee began an internal investigation in 2007, shortly after Foo assumed her position.
Immediately Foo jumped to it, working with the auditors, the group’s board and the external lawyers on the matter, and collaborating with the SEC. The error, which was found to be caused by “cultural misunderstanding” in China, was finally cleared of a potential accounting fraud allegation in 2010.
“That was an eye-opener for all of us,” says Foo. “It raised the alarm over our internal controls and convinced us that things had to change to make sure such a thing couldn’t happen again.”
Although it was a lesson hard-learned, the event has proven to be beneficial for the company’s long-term well-being, particularly in compliance and corporate governance.
“The legal team and the board have worked together and put in place a process to ensure full compliance with the laws and regulations applicable to the group’s business, as well as with the listing and disclosure rules in Singapore and the US,” she says.
Foo goes on to note that the Wall Street Reform and Consumer Protection Act, commonly known as the Dodd-Frank Act, and the Foreign Corrupt Practices Act, are among the key areas of her compliance focus.
Although listed in the US, China forms a significant part of CYI’s underlying business, where it has more than 9,000 employees and a large number of operations and foreign-Sino joint ventures. Having a good understanding of Chinese culture, apart from the necessary language skills, is essential for Foo’s work.
She regularly flies to China to oversee joint ventures and new projects, as well as to attend investment meetings with senior management from both the parent company and its subsidiaries. In many cases, the joint venture partners or business counterparts in China are state-owned companies. More often than not, getting a deal through or overcoming a particular obstacle cannot be achieved solely on a strong legal and business case – there has to be a high level of cultural awareness and sensitivity.
The Chinese way
Highlighting the cultural differences between China and the West, Foo says business parties in the international practice generally go to board meetings to resolve issues, whereas in China they prefer to agree on issues ahead of meetings.
“There were times when the senior management of our Chinese subsidiaries would knock on my hotel door at 11pm to discuss matters and resolve issues prior to the next day’s meeting,” Foo recalls.
It can be tough going at times but Foo keeps an open mind about the differing ways of doing business.
“We try to accommodate them and work with them, as we need their co-operation on many levels – you have to adapt your mindset and way of working to fit with them,” she says.
Those are the demands facing a general counsel who works across cultural divides while tackling some of the biggest legal issues in the market.
Deborah Foo, China Yuchai International
Position: General counsel
Number of employees: More than 9,000
Net revenue (2013): $2.6bn
Estimated annual legal spend: $1m-plus
Legal capacity: 3