Recruiting a foreign director.

• Author: Loewestein, Victor H.

Adding a non-U.S. national to an American board is easier said than done. What type of director is right for this job?

It's a small world. This fact has become increasingly clear for American corporations who set up shop overseas and aggressively pursue foreign markets. But the global marketplace is hardly a homogeneous one. Accordingly, one of the questions U.S. multinational corporations are asking themselves is whether they should structure their boards of directors to accommodate non-U.S. nationals. If a company has 40% of its sales outside of the U.S. - and perhaps 50% of its profits - shouldn't the board also reflect its international presence?

Appointing a foreigner to a board highlights a company's commitment to its international markets. It sends the message to the market that the company generates - or wants to generate - an important part of its business outside of the United States. In addition, a foreign director can offer a better understanding of the new and different markets in which the company is operating.

Many U.S. companies have acknowledged that what plays in the marketplace in Peoria is not necessarily going to work in Poland or Peru. To foster understanding of foreign markets, many of these companies are looking to foreign directors.

Sara Lee, for example, has added an Australian, Sir Arvi Parbo, chairman of Western Mining Corporation Holdings Ltd., to reflect its growing business in that region. Amoco has added a Dutch board member, Floris Maljers, retired chairman of Unilever N.V., to reinforce its commitment to Europe. Citicorp, with its large Latin American portfolio, counts Dr. Mario Simonsen, vice chairman of the Brazilian Institute of Economics and the Getulio Vargas Foundation, as one of its board members.

Slow Progress

Despite these isolated cases, progress has been slow overall. If we look at Colgate-Palmolive and Procter & Gamble, for example, two of the most international consumer goods companies in the world, we find that neither has an outside board member who is not a resident of the U.S. and whose core business is outside the U.S. What message does that send about their commitment to international markets?

Putting a director whose home country is a base of operations for that company on its board not only brings a fresh and relevant point of view, but also helps legitimize the company's "global perspective." Moreover, a non-U.S. national sitting on a board can accomplish things in his or her country...