The Case for Global Boards

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As participants in the most powerful market in the world, U.S. enterprises have had the luxury of choosing whether to go global. The country has only 5 percent of the world’s population, yet generates 20 percent of economic heft. Despite an overlay of isolationism, our borders continue to blur. Global competition is swelling, and more domestic companies are compelled to globalize. About 43 percent of the revenue generated by S&P 50 companies now comes from international sources.

Though American multinationals account for only 2 percent of the world’s jobs, they own or orchestrate the supply chains that account for over 50 percent of world trade; despite declining profits, they make up 40 percent of the value of the West’s stock markets, and they own most of the world’s intellectual property. For the top 50 American multinationals, 65 percent of foreign profits now come from industries reliant on intellectual property, such as technology, drug patents, and finance, up from 35 percent a decade ago.

Through scale, innovation, and rapid response to change, the private sector, as well as NGOs, are critically impacting—and creating—international policy. So, the importance of boards, the enterprises’ compass, is magnified. The most successful enterprises will globalize their boards.

Can a global company be truly global without a global board?

Can a global company be truly global without a global board? If an enterprise has an investment in a particular market, does it not gain tremendous advantage by bringing board members who know that region onto the board? A Seattle company was able to recruit a key Chinese executive with the help of a Chinese director. A large mining company avoided a disastrous acquisition of a soon to be bankrupt company in South America.

A globally diverse board can help recognize opportunities and deflect significant risk. Yet, only 7 percent of directors of S&P companies in the United States are foreign nationals, and only 14 percent have meaningful international work experience. In fact, even in the most globalized companies, those that generate more than half their revenue from non-U.S. sources, only two out of 10 directors have meaningful global experience. 

Why such a disconnect? First, we tend to be most comfortable with people just like us, especially on our boards. Secondly, too many boards take an ad hoc approach to recruiting board members, so they simply don’t consider potential global candidates.

In the hierarchy of board leadership, the participation of women is dismal. If we don’t have diverse leadership at the top, how can we be responsive to the women who make up the majority of affected constituents?

As borders blur, nothing is more important than trusting the financial and commercial integrity of companies we do business with and the NGOs we rely on; nothing is more important than having confidence in the leadership of these organizations. Without transparency and accountability, without objective oversight by the boards of directors, risk of abuse goes unchecked.

Good boards drive good companies. From Germany to Kuala Lumpur, TIAA-CREF, CalPERS, Vanguard, Blackrock and other investors, shareholder groups, associations, and pressure groups are actively engaged in pushing corporate governance reform globally.

In this vein, the value of independent, global boards is increasingly recognized. The most desired backgrounds for new board members are finance (60%) followed by global and cyber (44% each). Every company, regardless of size or complexion, can recruit board members precisely to meet critical global needs. Strategic global boards vibrate through an organization.

Why do global boards matter?

  • They enhance strategic vision, risk mitigation, and provide unique market insights not typically available to domestic directors.
  • They validate the global commitment of the enterprise to shareholders, the financial markets, employees, partners, suppliers, customers. The capital markets compel reform.
  • Boards are a way to evaluate companies across borders. The board is a common denominator, a universal metric.
  • They help avoid crises that may be triggered by inept leadership, cyber fraud, the wrong acquisition, a corrupt partner or employee, environmental destruction, or failed strategy in a foreign market that may not be detected by local board members not familiar with the nuances of those markets.
  • They embrace opportunities and provide oversight, while embedding and modeling ethics and integrity.
  • Global boards enable diversity of thought, expertise, gender, industry, and geography to respond to diverse constituencies.
  • Global boards focus on the holistic future, optimizing resilience and opportunity.

Repeated studies show that diversity is essential to good boards. The compelling issue today is the underrepresentation of women on boards. Companies with strong female leadership generated a return on equity of over 10 percent per year versus 7.4 percent for those without. Recent studies have also found that companies with a gender diverse board were better at managing risk and were involved in fewer controversies, including fraud.

Fifteen percent of directors globally are women, up from 12 percent in 2015, ranging from 42 percent in Norway to under 3 percent in Japan. The swelling numbers are impactful, but meaningful success is uneven. For example, India has fallen behind, and many organizations are putting non-independent, female family members on boards, resulting in hundreds of companies paying fines for noncompliance. Almost 74 percent of boards have at least one woman. However, looking more closely, this means that over a quarter of all boards globally have no women.

Further, in the hierarchy of board leadership, the participation of women is dismal, as evidenced by the fact that women hold only 4 percent of board chairmanships. If we don’t have diverse leadership at the top, how can we be responsive to the women who make up the majority of investors, consumers, employees, and other affected constituents? The myths that assert there are few qualified women are just that—myths.

As multinationals globalize and diversify, they are increasingly at the forefront of foreign policy. Global boards are the future.

Yet, we are schizophrenic—globalism versus isolationism. Inclusion versus exclusion.

As multinationals globalize and diversify, they are increasingly at the forefront of foreign policy—creating business, yes, but also driving partnerships and strategic relationships. Multinationals and NGOs have the opportunity to drive ethics and uplift our culture—with integrity, inclusion, and respect for our planet.

We must globalize and diversify. The United States is exporting our model of independent, value-add boards. Any country, any company that wants access to the biggest markets and our exchanges must have a real board that provides oversight at the least and strategic advantage at the best. The capital markets compel reform.

Global boards are the future. Not only are our best companies recruiting board members to carry them into global markets, the best global companies based outside the United States increasingly seek Americans on their boards. It provides a clear, competitive advantage.

The untold stories are the hundreds of enterprises whose strategic, diverse boards help avoid the fatal mistakes and propel their organizations into the global future.


Susan F. Shultz is a Pacific Council member and founder of The Board Institute, Inc. and SSA Executive Search International, Ltd.

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