Diversifying Corporate Boards

Yesterday’s Financial Times carried a useful round-up of trends in the world of developing market mega caps.  Stefan Wagstyl points to statistics about the growth in cross-border M&A originating in the BRICs and the next tier of emerging markets.  For the most part, the acquisition of US corporate assets by such companies has flown below the radar or been blocked (Huawei/3Com, Dubai Ports).  As the financial strength and management expertise of  such companies develop, we should expect to see many more larger and successful transactions, not all of them friendly.

Which brings us to the question of the composition of the boards of the largest US companies, those most likely to become engaged with developing world partners in the sale or acquisition of  US assets.  Would it not be useful to have, at the highest levels of corporate governance, individuals with meaningful experience running businesses in emerging markets?  Insights into culturally-contingent negotiating styles, a non-US world view, an understanding of non-financial motives behind a cross-border transaction would all presumably serve to strengthen the ability of  US corporations to deal with the expected wave of emerging market M&A.

Perhaps US corporate leaders disagree with this perspective or perhaps the pool of potential board members from Indonesia or Turkey is vanishingly small.  Nonetheless, it was somewhat shocking to conduct a random review of the board composition of some global top fifty US companies.  With the exception of a handful of foreign-born CEOs who have spent substantial portions of their careers in the US, a smattering of Canadians and Ernesto Zedillo, the number of non-US board members at these companies is tiny to non-existent.

There is no doubt that finding qualified candidates presents significant challenges but we believe the effort should be urgently undertaken.  GE’s Jeff Immelt has made it known that he is anxious to increase national diversity in the company’s senior leadership ranks, but as boards of directors are increasingly expected to play a more hands-on role we believe the boardroom requires the same initiative.  If only to give poor Mr. Zedillo a rest.

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