Leadership by Geoff Colvin

Boards need big talent at home and abroad

December 5, 2008: 5:36 PM ET

by Jessica Shambora

International representation on public company boards is stunningly low, as Pattie wrote on Wednesday. Besides Yahoo, Target and Pfizer, here are 10 more Fortune 500 companies that recruiting firm Egon Zehnder notes have no foreign nationals on their boards: Intel (INTC), Merck (MRK), Cisco (CSCO), Sara Lee (SLE), Marriott, Mattel, Viacom, Boeing, Halliburton and JPMorgan Chase. Given the global operations and ambitions of these mega-corporations, how does it make sense that only 6.6% of S&P 500 directors, according to the new Egon Zehnder study, are foreign nationals?

For one thing, it's getting ever more difficult to persuade foreign execs to cross the ocean to serve. University of Michigan professor C.K. Prahald talked about this at the Fortune 500 Forum in Washington, D.C. this week. Add the stress and potential liability that corporate directors face today, and you have to ask: who needs the hassle?

Close to home as well, it's harder than ever to recruit public-company directors. A recent study by search firm Spencer Stuart shows that only 31% of new independent directors on S&P 500 boards are active CEOs, COOs, chairmen, presidents or vice chairmen. That's down from 49% a decade ago. The average number of outside corporate directorships held by CEOs today is 0.7, vs. 2.0 in 1998.

The fact is, most sitting CEOs today simply have no time for multiple boards. Many are adopting the Jack Welch model: When he ran General Electric (GE), he was on one board: his own. GE CEO Jeff Immelt follows suit. At Time Inc., Fortune's parent, CEO Ann Moore is restricted to one outside board. She's a director of Avon (AVP). The Spencer Stuart survey found that 56% of S&P 500 companies limit the number of outside boards on which their CEO may serve. Four percent prohibit their CEOs from serving on any outside boards.

"Board searches are harder than ever. Ever!" Tom Neff, Spencer Stuart's U.S. chairman, told Pattie a few months ago. Given that, who's left to recruit? More American lower-level managers. The Spencer Stuart survey shows that 19% of S&P 500 company directors hold positions below the top tier of management. That compares to 9% a decade ago. Good news for execs on the way up and eager to get board experience: Given today's supply and demand, it may be easier than ever to win a seat at the table.

Correction: Sara Lee has four foreign nationals on its board of directors. When the Egon Zehnder study was conducted in the summer of 2008, Sara Lee's board had three foreign nationals. Dr. John McAdam, retired chief executive officer of  Imperial Chemical Industries Limited (a British subsidiary of Dutch chemicals group Akzo Nobel), was appointed to the board in October.

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