A Global Casting Call for Corporate Boards

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AMERICAN companies seeking to expand internationally ought to do a better job of placing non-Americans on their boards to help guide them in those markets, says J. Frank Brown, newly appointed dean of Insead, the international business school with campuses in France and Singapore. Here are excerpts from a conversation: Q. Are American companies doing a good job of putting foreigners on their boards? A. I don’t think that the statistics would say that, particularly if you look at the 30 Dow Jones industrial companies. As part of research that we’ve done at Insead, we looked at those boards, and nine companies had all-American boards — 3M, AT&T, Boeing, Exxon Mobil, J. P. Morgan Chase, Merck, Pfizer, Verizon and Wal-Mart. Alcoa, Citigroup, General Electric, I.B.M. and Walt Disney all have more than 20 percent international directors. Alcoa has 40 percent. But if you look at the numbers, there are 40 international directors at the 30 companies, or just 11 percent of the total. Q. With so many companies aiming at new markets, why aren’t they putting more directors from those markets on their boards? A. I can think of two reasons. One is lack of focus, just not recognizing it as an issue or an opportunity. The second would be that people perceive that it’s difficult to execute on because of distance and the need to get people to meetings. More U.S. regulations have resulted in more meetings. But if you look at Alcoa, there is a director from Morocco, Brazil, Germany and Mexico. If you look at Citigroup, there are directors from Morocco, Germany, Mexico and Belgium. Somehow they’re managing to figure it out. I.B.M. and PepsiCo are also able to do it. They’re pretty good at doing remote conferencing and connecting via sophisticated video links. In addition, the international members make a commitment to travel, and the companies occasionally hold their board meetings outside the United States. Q. Which countries are United States companies most excited about and yet are least represented on their boards? A. According to our research on major U.S. companies, I’m not aware of any directors from China except for Pepsi. If you look at the emerging so-called BRIC countries, Brazil, Russia, India and China, which everybody thinks are critically important, Alcoa has someone from Brazil and PepsiCo C.E.O. Indra Nooyi also is on her company’s board, along with the director from China. Q. Why are there so few directors from China? A. You have to make sure that people are going to be able to get along from a language perspective. Certainly all the meetings are going to be in English. At Insead, I’ve got a Japanese director who is not fluent in English so we just arrange for simultaneous translation. It takes a little bit more time and effort, but it’s effective. He provides useful input. Q. Since so many Indians speak English, why are there so few Indian directors on American boards? A. That’s a great question. It’s only Indra. One of the obvious answers is that maybe there’s a competitive element there. Are American companies worried about getting close to India because of outsourcing and competitive issues? That’s just a guess. And again, some of it is the “out of sight, out of mind” issue. Q. Some major American companies have brought non-Americans into top management. Isn’t that enough? A. If you say, “I have a diverse management team but I don’t need a diverse board,” that’s not right. The independent perspective and counsel and oversight that a board gives you is critical. I believe more diverse teams make better decisions because they consider a broader array of risks and opportunities. They wind up with better decisions. The same thing is true of boards. Q. Who is an example of a director who has helped an American company in some way? A. I’ve got to believe that having Minoru Makihara, the former chairman of Mitsubishi, has been informative to I.B.M.’s strategy in Japan and Asia, the business situation in those markets and how it might relate to the company as a whole. It’s just logical. Q. Is one of the problems that it’s difficult to fit a foreigner into a clubby board culture? A. I hope that’s not the reason, that we just want comfortable clubs. That’s not good for governance. Q. How do boards integrate non-Americans? A. I’ll bet if you look at the 40 directors, they all speak English, and they all have experience in the United States. Many have done tours in the United States. Some have raised families. There is a tremendous population of people who have an experience base in the United States. I don’t think it’s that hard to get directors who have that diverse perspective but who also have an appreciation of doing business in the United States. Q. What other prominent international directors are on U.S. boards? A. Ernesto Zedillo, the former president of Mexico, is on Alcoa’s board and so is Renault-Nissan C.E.O. Carlos Ghosn. Klaus Kleinfeld, the C.E.O. of Siemens, is on both Alcoa and Citigroup, and Novartis C.E.O. Daniel Vasella is on Pepsi’s board. Q. In general, are European multinationals doing a better job on this issue? A. The answer is yes. Very much so. Logitech, for example, has a Swiss C.E.O. and an Italian, a Singaporean, a Taiwanese, a Japanese and a Swiss on the board.