International advisory councils.

• Author: Turner, William C.
• Position: Council formation

They can be a source of high-caliber expertise for companies with multinational operations. Here is some advice on forming such a council.

An international advisory council is a group of distinguished business, financial, and former government leaders who come together periodically to advise the top management of a multinational corporation on policy questions pertaining to the economic, political, and social environments of the principal markets where the enterprise operates. This group of leaders identifies critical issues which will affect the company and assesses the implications for strategy, investments, and operations.

Some councils - such as those established by large money center banks - are global in scope, drawing representation from major countries around the world. Others focus on a particular region - e.g., Europe, South America, Asia - or a specific country of special importance, such as Brazil, Mexico, Canada, Australia, and China.

Advisory councils are not debating societies or think tanks dealing in abstractions. Rather, they are intended to provide practical policy-level guidance on specific matters critical to the success of the sponsoring company. Their primary function is to help management anticipate developments in different parts of the world before they occur and to suggest ways to alleviate problems, remove impediments, minimize risks, and capitalize on opportunities.

The members of an advisory council provide a rich reservoir of collective expertise management experience, board relationships, business and government contacts that can be applied to specific problems or opportunities confronting a company. No other source can offer that kind of high-caliber, senior-level counsel, which is one of the reasons the advisory council approach has become increasingly valuable for companies with multinational operations.

Advisory councils fulfill a number of objectives. The primary objective, as already noted, is to provide policy-level guidance on issues relating to the political, economic, and social environments of a particular regional or national market. But a council, precisely because of its high-level mix of industrial, financial, public sector, geographic, and cultural experience, also can serve as a useful sounding board for other strategic problems and decisions the company is facing.

In addition, individual members of the council, on an ad hoc basis, can assist in introductions and provide counsel on negotiations, government relations, prospective joint ventures, and important contacts. They can also provide assistance on specific problems or opportunities in those countries and industrial fields where they have particular knowledge.

Finally, there is the public relations value of having an international advisory council. The very existence of such a council signals the marketplace and local government that the company is serious about and sensitive to the environments in which it is operating. It also provides opportunities for specially planned social events with local officials, major customers, and prominent members of the business community.

Board vs. Council

Many companies that have operations in various political jurisdictions must have a board of directors to comply with the legal requirements of those countries. There are distinct differences, however, between such a board and an advisory council:

* An advisory council starts its discussion where most board meetings end. The attention of council members and the creative thrust of their interchange is focused on critical questions affecting strategy. By contrast, a local board of directors spends most of its time on routine activities required by law and administrative matters, such as committee reports, budgets, compliance matters, and succession planning.

* Advisory councils exist at the pleasure of management and have no legal status or authority. Council members have no legal liability, and conflict of interest is less of a problem.

* Service on an advisory council is far less time-consuming.

* Finally, advisory councils tend to be far more prestigious, attracting a broader mix of senior-level leaders than could be enticed onto subsidiary boards.

It is difficult to keep an up-to-the-minute count of advisory councils, but I would estimate that there are now more than 70 councils. Most of these councils have been set up by U.S.-based multinationals, although there are several for European and East Asian companies.

In the near future, however, I think we will see many more non-U.S. multinationals - particularly from Europe and Asia - creating advisory councils of their own for different regions of the world, including the U.S. and North America. A significant number of foreign companies already have a major stake in the U.S. As they seek out...