Eric Mok FCIS FCS, Company Secretary and Assistant General Counsel, Lenovo Group, tells CSj about the challenges and rewards of working as a company secretary for an organisation that has made the transition from a domestic to a multinational corporation.
Computer maker Lenovo Group was originally founded in a dusty, two-room Beijing guardhouse in 1984. Today, it’s the largest PC maker in the world and a Fortune 500 frontrunner in smart connected devices with employees in more than 60 countries. But the initial innovative and entrepreneurial spirit is still present in the company culture today.
That became more than clear for Eric Mok when he became the firm’s global company secretary in 2005. Just a few months earlier, Lenovo had acquired IBM’s famed Personal Computer Division (PCD) in a US$1.25 billion deal. This became the starting shot for the company’s radical and sometimes challenging transformation from a local Chinese to a truly global corporation.
‘It was very exciting at the time’, Eric Mok said in an interview with CSj. ‘It was a big challenge for the company. From my perspective, as company secretary on the board of directors, it was also very challenging’.
Can we start by discussing your personal and professional background?
‘I initially trained as a company secretary. I graduated from the Hong Kong Polytechnic with a Professional Diploma in Company Secretaryship and Administration and, by the time I graduated, I had also completed all the external examinations of the Chartered Secretarial qualification. I was recruited as a Graduate in the Corporate Secretarial Department of Ernst & Whinney, one of the then “big eight” CPA firms, but when I graduated and reported for duty, the firm had already merged with Arthur Young, another CPA firm, to become the existing Ernst & Young. The Corporate Secretarial Department of Ernst & Young was later restructured as Tengis Ltd which is now a part of the Tricor Group.
Tengis was one of the best corporate secretarial practices at that time and I spent two years over there and at the same time I completed the UK Common Professional Examination. I was then enrolled to study the Postgraduate Certificate in Laws (PCLL) at The University of Hong Kong. After the PCLL, I articled and practiced as a solicitor in a law firm in Hong Kong focusing on corporate, commercial and litigation areas.
As my interest is in the corporate area, I then moved in-house and worked as the legal counsel and company secretary for a succession of listed companies. I joined Lenovo as the Company Secretary and Assistant General Counsel in 2005, a few months after the acquisition of the IBM PCD.’
It would be interesting to hear more about Lenovo’s transition from a domestic Mainland Chinese firm to a multinational corporation – can you tell us about that experience?
‘At the time of the IBM PCD acquisition, Lenovo was the ninth biggest PC company in the world and was basically a Chinese company with very limited overseas business. After the acquisition we suddenly doubled the number of our employees, with many new people coming from IBM in the US.
Before, all seven board directors were Chinese – the composition was relatively simple. Afterwards, we had five US directors joining the board. We had some American equity funds invested in our business and they nominated US directors to sit on our board. With these new American directors joining the board, it became a very interesting time to see how East meets West. To me, it was also a challenging and remarkable experience.’
How did this affect the board dynamics?
‘The language was a big challenge. At the time, not all of our Chinese directors could speak fluent English. The company made a decision to use English as the medium of communication in board meetings.’
Why did the company make that decision?
‘We had a very strong determination to become a global company and to compete with global players. In addition to making changes in the business and organisation, the company needed to keep up with the best corporate governance practices in the global market. Using English as a medium of communication would help to attract well-qualified people to the board and would naturally make communication with the world better.’
You mention the need for the company to keep up with the best corporate governance practices – how has Lenovo and its founder and directors adapted to global corporate governance regulations and expectations via their Hong Kong listing and having international stakeholders?
‘Looking back, it seems to me it was a natural development. As I mentioned, after the acquisition of the IBM PCD, the company had a strong determination to become a global corporation. We knew that this meant keeping up with the best corporate governance practices in the global market. With this understanding, directors and management have a high expectation of our corporate governance practices and this has made it relatively easy to adapt to the changes we needed to make in these areas.’
Lenovo CEO Yang Yuanqing has been ranked one of the world’s best CEOs by Barron’s and Founder Liu Chuanzhi was already in 2005 named ‘China’s high-tech hero’ by the Financial Times. What is it like working with these leaders?
‘As you may guess, they have a high expectation of your performance. You need to practice a high level of professionalism to win their trust in your work. You can never say something without a solid base. I’m very happy that I have such a good working relationship with them, but also with the whole board of directors and senior management team.’
Lenovo is in an extremely fast-moving industry – has the company been able to retain its initial entrepreneurial spirit?
‘We are still very hungry, both in terms of technology and business. The IT industry is moving very fast and we have to stay hungry for new innovative technology. We are also keen to enter into new markets. Today, we have employees in more than 60 countries and are looking to develop business in more countries, especially developing markets. It’s very important to keep up this spirit.
It’s been 10 years since the acquisition of IBM PCD and we are quite proud of what we have accomplished during this decade. Our share of the global PC market has risen from 2% to 21%, our turnover has risen from US$3 billion to US$46 billion and we have gone from selling only PCs to being the world’s third biggest tablet maker. We’ve also become a Global Fortune 500 company.
During the decade, we’ve seen very big changes, and actually made eight successful acquisitions in addition to IBM PCD. In January 2014 we bought mobile phone handset maker Motorola Mobility from Google. Just a few weeks earlier we acquired IBM’s “x86” server business.’
What was your role as the company secretary in these acquisitions?
‘For the Motorola acquisition, our team participated in the transaction mainly in terms of the approval process and ensuring compliance with the Hong Kong listing rules and securities regulations. We also participated in the final completion arrangements. Due to the sensitivity of the transaction, we stayed awake through the night to await the signing of the agreement. Although we had already prepared an announcement, we had to be prepared for any last-minute changes made during the night. We had to make sure we published the statement at the right time and also that the agreement complied with all regulations. It was exciting and we – the whole team – were experienced in dealing with this kind of transaction as this was the eighth acquisition since the IBM PCD deal in 2005. We worked very closely with other professional parties to make sure we complied with the listing rules requirements and that all information went out to the public in a fair way.
Timing was critical. The Hong Kong stock exchange has a specific time slot for putting up announcements. If you miss the 8.30am deadline, before trading starts, you have to wait till 12noon. And you might also have to apply for suspension of trading of the shares until noon – that’s a big problem. Another difficulty is controlling the flow of information. You have to keep news of the deal confidential until it is signed and an announcement can be made. We had very strict internal procedures in the company to control these things.’
Does the current announcement slot cause problems for companies disclosing important events in other time zones?
‘Yes and we’ve actually talked informally about this issue with the stock exchange. Currently, the announcement time in the morning session is only 6:00am–8:30am. This is naturally set for Hong Kong time but many companies in Hong Kong enter into transactions in the US. How do you expect them to fulfil the requirements when they also want to hold a press conference in the US before the market closes there? This is not the way to do business. It’s also very hard to get press coverage if we publish the news too late in the US, so we could lose the value of news.’
Lenovo has operations in more than 60 countries and has four ‘key location’ offices in the US, China, Hong Kong and Japan – what was the rationale behind the decision not to have a single headquarters?
‘We want to be a global corporation and having one single headquarters would restrict us. Other than the four locations that you mention, we have operational centres located strategically around the world to drive global and local business. Our dispersed structure also keeps us closer to customers, enabling us to react more quickly to local market requirements.’
Being a global company, are there other international securities regulatory issues you need to consider?
‘From a listing perspective, we don’t have any secondary listings so our focus is on the Hong Kong rules and regulations. We have American Depository Receipts (ADRs) trading in the US so we are also required to comply with the relevant rules there. For other international rules and regulations, we have support from the company’s global legal team.’
What’s your approach to sustainability?
‘Our approach to sustainability reflects our unique heritage having roots in both East and West. For the board of directors and senior management corporate social responsibility (CSR) is always high on the agenda. We have a team of people working solely on these issues, and the head of the CSR team is our Senior Vice-President and Chief Technology Officer.
When you talk about CSR in terms of Lenovo you’re mainly talking about manufacturing, welfare of employees and recycling of components and products. That’s why we have senior management focusing on CSR. We publish our CSR report annually on our website and our Chief Technology Officer reports to the board about CSR. I believe we’re doing a good job in this area. We’ve been awarded CSR awards many times and have been a constituent stock of the Hang Seng Corporate Sustainability Index since its inception in 2010. In two consecutive years (2015 and 2016), we were selected for inclusion in the “Global 100 Most Sustainable Corporations” index by Corporate Knights.’
Are you involved in these issues too?
‘CSR is about more than manufacturing – it’s also about corporate governance so I’m very involved.’
Despite Lenovo’s transition to being a global company, there is sometimes the assumption in the market, which your CEO has strongly denied, that Lenovo is a government-controlled company – what’s your view of this issue?
‘This is not correct. We are not controlled by any government. Actually, as you can see, all the shares of Lenovo are traded freely on the Hong Kong stock exchange, making us open, transparent and accountable to our public shareholders and a wide range of other stakeholders globally. Our current single largest shareholder is Legend Holdings Corporation, which is also listed on the Hong Kong stock exchange. Lenovo is the model of a modern, truly global company with freely traded shares. We have shared international and Chinese roots; seven different nationalities among our top 12 executives; over 60,000 employees across 60 countries; and global investments. In addition, we have a very independent board of directors in which seven out of the 11 directors are independent directors.
Lenovo is going through a large-scale, cost-cutting restructuring process – how are you, as the company secretary, involved?
‘My first priority, just as with the acquisitions we discussed earlier, is that information disclosure is handled in accordance with the regulatory requirements. We need to decide if these kinds of restructuring plans are inside information that may affect the share price or trading and, if so, we have to ensure that the information is disclosed according to the requirements. In these issues we work closely with other teams in the company.’
In what ways is your job, as the company secretary of a global company, different from that of a company secretary of a domestic company?
‘One major difference is that I often work around the clock and I travel more frequently. On one occasion I needed to wake up in the middle of the night to answer questions relating to the Hong Kong listing rules from a colleague in the US.
We schedule at least four face-to-face board meetings through the year and we hold these meetings in different cities around the world. Other than Hong Kong, we’ve had these meetings in places like Beijing, Wuhan, India, Brazil, Italy, Japan, New York, Raleigh and San Francisco. So my team is relatively more mobile. The meetings can be in hotels, local offices or even in a manufacturing plant or a research centre.
Due to the global nature of the company and our Hong Kong listing, we are also required to provide training to relevant employees around the world on the Hong Kong listing rules and the processes needed to ensure compliance with the same. We also often have conference calls with colleagues from all over the world. So the work hours can be very demanding, but the company is very caring about our way of life. We’ve become much more flexible in terms of office hours and timing. If you’ve had a late conference call the previous evening, it is understandable that you may come in a bit later the next day. This is fairer and gives a better work/life balance.’
Do you enjoy working for a global company?
‘It’s challenging but I like it. Many people think a company secretary’s job is very routine but my job is very exciting’.