Big boards need to act global
Think global. Act local. That’s a rule of doing business globally. But when it comes to who resides in the boardroom, a lot of U.S. corporations seem to apply that rule to a fault: they have pathetically few international directors.
Board effectiveness was a hot topic on this last day of the Fortune 500 Forum in Washington D.C., and this finding, from a just released study by search firm Egon Zehnder, was front and center. Egon Zehnder looked at 5,444 directors of S&P 500 companies and found that just 6.6% are foreign nationals. This despite the fact that the S&P 500 companies derive 37% of their revenues outside the U.S. And those international revenues have grown at nearly twice the rate of domestic sales over the past three years. Can you believe that three-quarters of S&P 500 directors have no international work experience?
What gives? Foreign nationals are “outside the zone of comfort” of many boards, says C.K. Prahalad, a University of Michigan Business School professor and expert on emerging markets. Prahalad, who along with McKinsey Americas head Michael Paesalos-Fox was on a panel called “Boards and the Value Creation Process” that I moderated this morning, explains that boards typically invite new directors who are just like them — meaning more Americans.
Prahalad is on the boards of Hindustan Unilever, British-based Pearson, and NCR. Among the S&P 500, Mastercard (MA), General Electric (GE), and UPS (UPS) have above average international representation. And the companies that have zero foreign nationals? Yahoo (YHOO), Target (TGT), and Pfizer (PFE).
Journalism teacher and newspaper adviser at Palo Alto High School
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