International Directors can bring many benefits to your organisation. This article will look at some of the pros and cons of appointing an international board director.
Across the globe it is now standard practice for organisations to have mainly independent directors. However, only a small number of boards include international board members. Boards who avoid appointing international board members are missing out on a huge potential pool of diverse candidates.
Before organisations really started to consider diversity in the board room and in organisations more generally, it made sense that they would recruit board members who were well known, well respected and had direct industry experience. It was the responsibility of the board to support the Chief Executive’s strategy and assure the shareholders that their interests were being best represented.
Clearly this strategy, though well intentioned, held some significant downsides. Board directors were often reliant on the CEO to maintain their board membership which could stifle their independence. It also created a heavy reliance on a few individuals and their networks. With the rise of the digital revolution and the rapidly changing global economy, the ability of board members to think through and find solutions to highly complex problems becomes ever more challenging. As such, most organisations now recognise the need for independent and diverse boards to enable it to fulfil better its objectives.
The purpose of this article isn’t to go into detail on the complexities of building board diversity. I will do that in another article later this year. However, in the rapidly changing world we live in today it is necessary to build boards that are representative of the key stakeholders they serve. This means that organisations need to structure boards that are independent, representative of their shareholders, members, employees and customers, coupled with the technical skills and experience needed to drive the organisation forward.
BENEFITS OF INDEPENDENCE
The potential benefits of an independent board are well documented. Typically, an Independent Director has fewer reasons to be obligated to the CEO and is therefore better placed to protect the interests of shareholders and/or other key stakeholders. Independent directors also bring diversity of thought, access to external resources, a wider range of connections and an objective view of issues affecting the business. Some organisations go one step further and have fully independent boards. In theory this should multiply the benefits of having independent directors without the need to enlarge the size of the board and thereby avoid the disadvantages of having a large and unwieldy board.
HOW CAN INTERNATIONAL BOARD DIRECTORS HELP?
Many Chairs often talk to us about globalisation and the need for skills that international directors possess. What’s interesting though is that most organisations misjudge international directors experience. A board director who has spent two years working in London, New York or Sydney before returning home has rather limited international exposure. It’s not until somebody has been immersed in a country and its culture for a prolonged period that they start to think internationally. Therefore, for it is essential to understand how an international board director can add value to your organisation and help it achieve its strategic goals.
As an organisation, Hoffman Reed works with some of the largest firms across the globe. I personally consult with clients in the pensions and investment space. As such, the clients I work with are typically headquartered in Australia, Canada, Netherlands, United Kingdom and the United States. When I speak with Chairs, they are often looking for, at least, one board member to have international experience. This is usually because they want to learn from best practice and experience across the globe. They want to have diversity of thought, diversity of education, diversity of ethnicity and gender. I recently spoke with one client who explained to me that since being appointed Chair he had discovered that all his board were contemporaries of his from university. While there was diversity of gender and ethnicity he was worried about diversity of thought and education and as such asked us to recruit an international board member that tackled this issue. This goes to the point that Charlie Munger made in a famous speech at USC Business School in 1994 about Mental Models. To find out more about mental models check out this blog post by Farnam Street. Mental Models: The Best Way to Make Intelligent Decisions
One of the major benefits of having an international board director is that they bring a global perspective to your board meetings. They will open your discussions to new ideas, help debate a wider range of issues and help find innovative solutions to problems which may not have been considered previously. Having a global perspective will help you learn from others and bring knowledge of global trends to develop your organisation. Globalisation is bringing the world together and it’s happening extremely quickly.
Hiring an international board director is also a great way to get current, deep market expertise in your specific industry onto your board but from a non-competitive organisation. In many instances, you can’t get this current expertise locally as it would have to come from a competitor organisation. If you only conduct a local board director search you are limiting the talent pool you can recruit from and potentially making it harder to attract diverse candidates.
DOWNSIDES OF APPOINTING INTERNATIONAL BOARD DIRECTORS
It would be remiss of me not to mention some of the downsides to appointing an international board director. Travel, time zones, cultural differences, board collegiality and the extra costs involved of hiring international board directors need to be considered when making an appointment. Many nominations committees find it easier to nominate a local director who they know rather than a board director who must fly halfway around the world for board meetings. However, with the advancement of technology it is now possible to attend meetings via video conference and many of our clients fly international board members in for meetings two or three times a year and they join the rest of the meetings via video conference. Ironically for many of our clients, COVID-19 has proven that this method of conducting board meetings is highly effective. While it does not build collegiality in the same way as in- person meetings do, it has demonstrated to many that online board meetings are much easier than was previously thought possible.
HOW HOFFMANN REED CAN HELP?
At Hoffmann Reed we are experts in facilitating global searches and finding individuals who will complement your board while at the same time bringing diversity, independence and technical expertise to your organisation. Please feel free to reach out to me if you would like to discuss further how we can help you.
ABOUT THE AUTHOR
Paul Battye is CEO of Hoffmann Reed a global leadership advisory business providing talent intelligence, talent acquisition, talent assessment and talent development services.
Paul has 19 years experience in executive search having led C-suite, Board and Senior Management searches for both private and public sector organisations across the globe. He advises clients on how to attract, retain and develop the best senior leadership talent with diversity and inclusion at the core of all our service offerings.