Boards: Are you “Thinking Globally”?

This article originally appeared in my latest eBook, “Board Composition.” Click here to download now!

In 1989, I discovered a passion for international marketing. I was the director of marketing for a high tech company, and the leadership of the Canadian sales team reached out to me to represent them at corporate in California because I’m Canadian. While there is no ocean dividing the U.S. and Canada, there are many major cultural differences, especially with my native Quebec, where we are highly influenced by European culture. I instantaneously became the “Canadian Ambassador” for the company– an advocate regarding differences in sales and marketing in Canada. I loved being in this position. I really understood, unlike some of my American colleagues, that the rest of the world is not like the U.S., which is important to grasp when conducting a global business. I grew my role there, ultimately leading the international marketing team to create the global marketing team at corporate to represent the rest of the world. And later I made this my focus with my first business – helping American companies launch in international markets (EMEA, APAC) and address globalization and localization challenges effectively and efficiently. Today, as an advocate for great governance, I am passionate about optimal board composition, which is inclusive of global knowhow at the board table.

Did you know:

• “72% of all S&P 500 companies now report some amount of international revenue. International revenue as a share of total revenue is 37%, up 5.5 percentage points since 2008.”
• Research indicates “the share of directors with meaningful international work experience among S&P 500 directors is now at 14.1%, up from 8% in 2008.”
• “American companies that disclose international revenue gain the most from Europe, Middle East and Africa (EMEA). Roughly 3 in 10 U.S. dollars of international revenue is generated by EMEA.”
• The research cites the International revenue breakdown as follows: EMEA (28%), ASIA/PAC (18%), Americas (non-US 16%) and other International (39%). (All data via Global Board Index^TM , Egon Zehnder, 2014)

Companies that aspire to increase market share beyond their home markets need boards with global capability. It doesn’t suffice to have a management team and operations with international experience and a workforce that is knowledgeable about local markets and international business. Given the role of the board to engage in strategy (see my article on the NACD Blue Ribbon Commission on Strategy Development), it makes great sense to have directors with deep international and global knowledge, skills and experience who can introduce the right insights and questions as strategy is defined and altered.

I believe that boards must make it a priority to evolve by recruiting more directors with international and global capabilities, not only for the sake of keeping up with global opportunities, but also to be able to swiftly anticipate and strategically address new threats and opportunities. The fact is that we live in a global business world, and businesses are literally instantaneously visible for the best and/or exposed for the worst, worldwide.

Nominating and Governance Committees have a great responsibility to assess and address the global capability of their boards as they objectively and proactively assess the composition of their boards and their succession planning. These committees need to recognize that they must have global capability within their boards, define what is needed and recruit appropriate directors. This is a great diversity issue, since globalization is only going to continue to be “the way.” If a woman or a minority can fill the gap, then that’s a bonus that brings knowledge, experience and skills in the form of a female and/or minority director.

While generating revenues from different regions creates diversity in our earnings and increases our growth potential, this globalization also comes with risk. We mustn’t assume that directors who have lived and breathed business exclusively in their home market have the optimal foresight in the future strategies of our organizations

According to Global Board Index^TM , Egon Zehnder, 2014: “Even among companies who depend significantly on overseas markets for revenue and revenue growth, very few American companies have truly global boards capable of advising and guiding the leadership team on global matters… 1 in 10 directors is a foreign national and that in 2 out of 10 directors report significant international work experience.”

The report goes on to say that the average distribution of global talent is still considerably lower than expected: “Information Technology reports the highest percentage of global revenue (55%), and has among the lowest levels of Board Global Capability (11%). Healthcare, Consumer Discretionary, and Financials report moderate degrees of global penetration (40%, 38%, and 32%), but below-average levels of Board Global Capability.”

Globalization is only going to continue trending. Undoubtedly, the companies that have talent within the Pivotal Leadership Trio^TM capable of identifying and capitalizing on global opportunities are far more likely to experience rapid economic growth around the globe.

The global pulse must be vibrant within our boardrooms for the companies that are rapidly expanding and generating a high percentage of their revenues outside the US.