Learning how board members of global companies select and integrate non-national members was the goal of the Global Navigation and Egon Zehnder International research study on board globalization. With the aid of Corporate Board Member magazine, the Board Globalization Research Study was sent to 675 non-national directors and 1,659 directors who serve on boards with non-national directors (fellow directors). Surveys were returned by 66 non-national directors for a response rate of 9.7% and by 115 fellow directors for a response rate of 6.9%.
The survey for each sample group began by asking about the motivations behind adding a non-national director to the board. The majority of responding fellow directors
(73%) answered that their board asked the non-national director to join the board because he/she had experience or insight in a country or region that was important to the company. Fifty percent of fellow directors said the non-national director had other qualities or experiences the board needed and was not selected because of his/her non-national background. Over a third (37%) of fellow directors answered that their board asked a non-national director to join the board because they wanted to better represent their customer, employee, or investor base. The wish to have greater diversity on the board was selected as a reason by 30% of responding fellow directors.
When asked about the motivations of the board for adding them as a director, US directors that serve on non-US based company boards were more likely to report that they were asked to serve because of their experience (68.9%). Only 44.4% of the non-US directors believed their general business experience was a deciding factor.
When asked why they decided to join the board, 65% of responding non-national directors believed they could make a unique contribution to the company. 53% of non-national directors indicated they joined the board because they respected the CEO. Being familiar with the company and wanting to be a part of it was the reason chosen by 38% of responding non-national directors. One-third (33%) of non-national respondents said they were familiar with the members of the board and wanted to work with them.
Fellow directors of non-national board members were asked how well the non-national director met their performance expectations.
Sixty-six percent indicated the non-national director has exceeded board performance expectations, with another 27% indicating the non-national director has met board performance expectations, but could improve. Only 2% answered that their non-national director had not met their expectations as a board member. 62.9% of non-US based board members were pleased by the affect the US director had on board culture. US boards that invited a non-national director to serve felt their new director contributed positively to risk management (37.7%) and opportunity evaluation (53.2%).
The non-national director study participants were asked if being a non-national director had met their expectations. 36% responded that the experience had exceeded their expectations. Another 50% rated the experience positively.
Next, the sample groups were asked about the complications of having a non-national director on the board. Logistical issues was selected most often by both groups: 58% of fellow directors selected this as a complication. US directors overseas were more likely to site logistical issues as a problem of serving on the board (55.6%), while just 33.6% of the non-US directors that travel to US board meetings sited logistical problems as an issue. US and non-US directors that serve an overseas board equally identified accounting issues as being a problem for them as they integrated into the board (11.1%). US fellow directors were more likely to complain about their new director not understanding US accounting standards (14.3%) than their non-US peers (2.9%).
The study next targeted the integration process for new directors, both domestic and non-national. Most (97%) responding fellow directors indicated that their board sends all new directors documents to familiarize them with past company performance. 100% of those respondents whose boards do not currently provide this information indicated that it should be done for all new directors joining the board.
Most (96%) of the fellow directors responded that their board reviews the indemnification and D&O policies with all new directors. All (100%) of the fellow directors who indicated that their board does not currently provide this review believe it should be offered for all new directors.
Ninety-five percent of responding fellow directors serve boards that have all new board members meet with key officers of the company. One percent of the fellow directors responded that their board only offers this opportunity to non-national directors. Again, all of the 4% who serve boards that do not currently offer any new director this opportunity believe the chance to meet with key officers of the company should be given to all new directors.
Ninety-three percent of responding fellow directors serve boards that provide new directors with background information on key officers and all fellow board members. An additional 2% serve boards that provide this information to non-national directors only. All of the 5% responding that their board does not currently provide this background information believe it should be provided as part of the integration process for all new directors.
A non-executive session of the board is held without management to familiarize all new directors with key areas of concern for 70% of the boards represented by fellow directors in the study. An additional 4% provide this executive session only for new non-national directors and 26% do not provide it at all. Of those fellow directors who serve boards that do not currently offer such a session, 74% believe they should offer these sessions for all new directors.
Only 23% of fellow directors indicated that their board sends all new directors to external board training within the first six months of service. Seventy-four percent of fellow directors serve boards that do not offer external board training to any new director within the first six months of service.
Along the same lines, 17% of non-national directors serve boards that provide all new directors with external board training within the first six months of service. Eighty-one percent of the non-national directors in the study serve boards that do not offer external board training to any new director within the first six months of service. Of those that serve boards that currently do not offer such training, 57% believe they should offer such training for all new directors; however, 43% do not believe external board training should be part of the new director integration process.
The majority (87%) of fellow directors serve boards that do not provide training to the current board about the culture of a new non-national director. When those without this training were asked if it should be included in the new director integration process, 37% agreed that it should.
It is interesting to note that 35% of non-national directors responded that their board does offer training to the current board about the culture of the new non-national director. Of the 63% of non-national directors serving boards that do not currently offer this training, 37% believe they should.
The chairperson, when separate from the CEO, was chosen most often by both responding non-national directors (48%) and responding fellow directors (56%) as the position currently responsible for assuring a smooth integration for new board members. The CEO was also chosen frequently by both non-national directors (30%) and fellow directors (44%) as currently having this responsibility. Fellow directors also chose the lead director (33%) as a position that is currently responsible for assuring the smooth integration of a new director.
Again, the chairperson was selected frequently by both non-national directors (30%) and fellow directors (27%) as the one who should take the lead in the new director integration. Non-national directors also felt the lead director (28%), chair of the nominating committee (24%), and the CEO (20%) should take the lead in this task. Fellow directors singled out the lead director (19%) and the chair of the nominating committee (18%) as the other positions that should take the lead in assuring a smooth integration for new directors.
The responding non-national directors selected the CFO (85%), the general counsel (83%), the entire board (75%), the corporate secretary (69%), the chair of the nominating committee (53%), and the CEO (50%) as positions that should participate in the integration of a new director.
Likewise, responding fellow directors selected the CFO (83%), the entire board (71%), the corporate secretary (70%), the general counsel (69%), the chair of the nominating committee (55%), and the CEO (46%) as positions that should participate in the smooth integration of a new director.
The majority of both non-national director respondents (84%) and fellow director respondents (91%) would add another non-national director to their board.
When asked, which region would you choose if you could find a great director candidate from any one country or area of the world, 36% of responding fellow directors selected Asia as the region from which they would select their next director candidate, with an additional 15% specifying China and 12% choosing Europe.
For further insights on the topic of Global Boards, read:
Global Board Index™ by Egon Zehnder International"The Exceptional and the Rule" by George L. Davis, Boston and Justus John O'Brien, New York"Enhancing the odds of success in global markets" by Damien I. O'Brien, Paris and Sydney
