Boards: shake up your memberships: why are boards still not global enough or diverse enough?

Author:Wardell, Charles W.B., III
Position:MERGERS & ACQUISITIONS

Twenty years ago David W. Johnson, who was then CEO of Campbell Soup Co., wrote an article in this journal imploring boards to globalize their memberships (see accompanying excerpt). Most U.S. boards, he noted, had only U.S. citizens as directors even though they oversaw companies leading a "crusade to convince billions of [international] consumers to buy American goods and services."

Today the crusade continues. Providers of U.S. goods and services are still aggressively looking for creative ways to tap 7 billion consumers abroad. The governance issue Johnson raised also persists, as relatively few U.S. boards have directors who are non-U.S. citizens. If Johnson were writing this article today--he passed away in June at the age of 83--he would emphasize anew how this narrowness hamstrings boards strategically, limiting their "cross-cultural insight" and ability to provide "wise counsel."

Johnson saw globalization as the most challenging issue for boards of two decades ago. The natural extension of this today is diversification-- the need for boards to have directors who represent and reflect their constituents not only geographically but also from the perspective of race, gender, age, backgrounds, and so forth.

A recent Financial Times study says that U.S. boards are mostly still "male, stale, and frail." I think that claim is exaggerated, but the point is that boards can continue to shake up their memberships. A National Association of Corporate Directors (NACD) Blue Ribbon Commission on the Diverse Board put it this way: "Boards now have a choice: maintain the current course and risk being left behind, or restructure board composition and operate at peak efficiency."

Encouraging turnover

Why are boards still not global enough or diverse enough if there is a business rationale? One reason, the Financial Times authors noted, was that U.S. boards have longer average tenures for directors than overseas counterparts...

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