Going Global? Most US Corporate Boards Still Lack International Representation

Are you a global enterprise or simply operating globally?

That distinction may seem to fine for some but it is an increasingly important question.Whether the institution is Chinese, European, American, or reflects some other geographical legacy there is still an inclination to populate the board of directors with homeboys.

It is especially worrisome, as the following article explains, that this lack of global awareness is prevalent among companies who generate over 50 percent of their activity outside of their home market.

This is consistent with CEO claims that they need a board comprised of individuals who 'understand the business' or 'with whom the other board members are comfortable' and similar cliches that generally reflect the desire to have board members who support the current regime and won't rock the boat.

This is hardly the stuff of disruptive innovation, despite all the hortatory calls to action heard at investor symposiums or on the executive conference circuit. But the reality is that lack of cultural and geographic diversity can impede the growth of organizations too tone deaf or merely inexperienced in the ways of the markets from which their future success will almost certainly be derived. JL

Joann Lublin reports in the Wall Street Journal:

Even the most global U.S. companies are fairly provincial: One in 10 directors is a foreign national at the 100 businesses where more than half of their revenue comes from outside America

The biggest U.S. businesses increasingly depend on international revenue, but most boards remain All-American—and that could threaten firms’ prospects for expansion abroad.

So concludes a study released Wednesday by Egon Zehnder, an executive-search firm. Only 7.2% of corporate directors in the S&P 500 index are foreign nationals, a tiny gain of 0.6 percentage points since 2008, its analysis found.

About 45% of such concerns have zero non-U.S. citizens as board members, estimated George L. Davis, Jr. , co-leader of Egon Zehnder’s global board practice.

International revenue represented 37% of S&P 500 companies’ revenue last year, an increase of 5.5 percentage points since 2008, according to the report. Nearly three-fourths of these businesses have some international revenue.

Even the most global U.S. companies are fairly provincial: One in 10 directors is a foreign national at the 100 businesses where more than half of their revenue comes from outside America, the report stated.

Advocates say global voices bring valuable perspectives to a boardroom. Boards with extensive global expertise “are better able to exploit the upside and minimize the downside of operating overseas,” Mr. Davis said. Boards without such expertise are “driving without headlights,” he continued.

Hewlett-Packard Co.  HPQ in Your Value Your Change Short position got about 64% of its revenue from outside the U.S. during fiscal 2013.

The board’s sole foreign national is Klaus Kleinfeld, the German-born CEO of Alcoa Inc. AA in Your Value Your Change Short position

Several other H-P directors have worked abroad, said company spokesman Howard Clabo. “We are focused on bringing the best possible candidates on to the board, regardless of where they are from.’’

Walt Disney Co.  DIS in Your Value Your Change Short position also has only one foreign director: German executive Fred H. Langhammer. The entertainment giant had an All-American board until Mr. Langhammer, a former CEO of Estée Lauder Cos., arrived in 2005.

Disney didn’t respond to requests to comment.

Wal-Mart Stores Inc.  WMT in Your Value Your Change Short position derived 29% of its sales from outside the U.S. in the fiscal year ended Jan. 31. Still, there only are two non-U.S. citizens on the giant retailer’s board.

Nine of Wal-Mart’s 10 outside directors have “broad, relevant leadership experience with multinational companies or in international markets,’’ said Randy Hargrove, a spokesman.

Indeed, big U.S. companies have a slightly larger representation of directors with international work experience, Egon Zehnder’s analysis showed. The proportion of such board members is 14.1%, up from 8% in 2008.

U.S. boards often have trouble attracting foreign nationals because a directorship requires extensive travel. Yet attending board meetings via videoconference can ease the burden, Mr. Davis said.

Boards’ low turnover rates also make it hard alter their geographic makeup, the recruiter added. “Not enough boards are thinking about…changing out old members.”