Globalizing your board.

• Author: Johnson, David W.
• Position: Includes related article

Shareowners want to know that the people sitting on the board have delivered results against competition. Today, that means global competition.

Overseas markets have never looked more promising. Opportunities for growth outstrip those available in the United States. Around the world, tariffs, foreign investment restrictions, and government intrusions into economic relations are on the decline. Meanwhile, Wall Street's performance pressure is unrelenting. The combination of all of these forces means that virtually all major U.S.-based companies that had not already developed substantial overseas businesses are now aggressively globalizing. Their collective zeal is nothing short of a business crusade to convince billions of consumers to buy American goods and services.

Today, however, more than 80% of U.S. boards consist entirely of U.S. citizens. Of companies that have foreign directors, most have only one; and most of those directors come from mature, industrialized, Western (and usually English speaking) economies typically not representing where the best business opportunities may be found. Overseas companies are no different: few have directors who are not citizens of the home country.

Given the brimming opportunity and the urgent priority now being accorded to globalization, why is this so? What, if anything, can or should be done about it?

I believe that appointing overseas business leaders, including leaders from regions and countries identified as "emerging markets," is good business as well as good governance. Benefits of such appointments can be enormous, and a board with reasonable expectations can readily offset the "downsides."

Six Advantages

From a business perspective, the case for appointing overseas business leaders as directors is strong. In my opinion, there are six principal advantages:

1. True diversity, a business-relevant difference which automatically expands the horizons of the boardroom - e.g., American companies benefit from dialogue with the Japanese on quality or from debate with leaders of European conglomerates about building brand franchises for the long term.

2. Addition of cross-cultural insight, from those who live it, which helps prevent common errors of multinationals operating beyond their home turf - stories of marketing campaigns crashing on local taboos are legion.

3. Wise counsel in selecting partners with whom to ally, and insight into competing under radically different ground rules.

4. Entree to top-level decision makers in countries and regions where that is a sine qua non - contacts...