Global Corporate Board Study: Respect for CEO Motivates Foreign Nationals to Join US Corporate Boards

Dec 09, 2010, 11:51 ET from Egon Zehnder International

NEW YORK, Dec. 9, 2010 /PRNewswire/ -- More than half of non-national (foreign) directors who serve on boards stated they joined because they respect the CEO of the company, while three-quarters of corporate board directors indicate the top reason their board recruited foreign directors is for their experience or insight in a country that was important to the company.  These are among the findings of a study released today called "The Board Globalization Research Study," conducted by Egon Zehnder International, a global executive search firm and Global Navigation, a peer-to-peer education resource for board directors of multi-national corporations.

"US Boards are increasingly eager to recruit foreign nationals as directors; they can provide valuable intelligence and assistance in key markets, but the relationship has to work equally well for both the individual director and the board. Understanding what motivates boards to recruit non-US directors, why foreign nationals wish to serve on US boards, and how satisfied each side is with the experience, is critical in ensuring a successful recruitment process as well as the likelihood that both the board and the non-US director would repeat the experience," said George L. Davis, Jr., co-leader of the Global Board Practice, Egon Zehnder International.

But there is apparently a mis-match regarding expectations being fulfilled.  According to the study, 66 percent of directors indicated the foreign directors exceeded board performance expectations, while only 36 percent of foreign directors stated that their experience had exceeded their expectations.  The majority of both foreign director respondents (84%) and fellow director respondents (91%) would add another non-national director to their board.

"If US boards are to continue to be able to attract non-US directors to serve on their boards, a challenge in any case, this gap in the perceived value of the experience must be resolved," said Justus O'Brien, co-managing partner of the US Board Practice, Egon Zehnder International. "A large part of the solution lies in ensuring the director understands what board service will entail as part of a larger integration process to ensure a smooth transition on to the board.  There should not be any surprises."

While the study highlighted a few challenges in bringing on foreign directors including logistical and accounting issues, national and foreign directors alike provided key insight into how to best integrate foreign national board members on a board.

"As companies grow internationally and add non-US board members, they add members who are different culturally from the current board. This causes interesting dynamic tensions," said Louis Kacyn, partner, Egon Zehnder International.  "When you have dynamic tensions at the board level, people begin to think differently, which is the very reason you brought these people on the board to begin with," he added.

To view an interview with Louis Kacyn visit: http://www.egonzehnder.com/us/clientservice/boardconsulting/article/id/17500286

The Board Globalization Research Study was sent to non-national directors and directors who serve on boards with non-national directors of companies headquartered in the following countries: Australia, Bermuda, Canada, China, France, Germany, Holland, India, Ireland, Israel, Italy, Netherlands, Singapore, Spain, Swiss, UK, USA.  The study detailed the following findings:

Motivation

  • Non-national directors indicate they were asked to join a board because their experience was important to the company and weren't selected because of the non-national background (59.1%).
  • When asked why they decided to join the board, 65 percent of responding non-national directors believed they could make a unique contribution to the company.
  • Thirty-seven percent of non-national directors answered that they were familiar with the company and wanted to be a part of it.
  • Nearly 50 percent of directors indicated they added non-national board members because they had experience the board needed and was not selected because of his/her country or background.

Integration

  • 85.7 percent of non-national directors indicate that a session of the board without management to familiarize the director with key areas of concern should be a part of the integration process for all new directors.
  • Only 17 percent of non-national directors serve boards that provide all new directors with external board training within the first six months of service.
  • Eighty percent of non-national directors believe that meeting with key officers of the company should be a part of the integration process for new directors.
  • 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.
  • 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.

To view a copy of the research study, please visit http://www.egonzehnder.com/board-globalization-survey.

About Egon Zehnder International

Egon Zehnder International is one of the largest privately-held executive search firms in the world with nearly 400 consultants operating from 63 wholly owned offices in 37 countries.  The firm specializes in senior-level executive search, board consulting and director search, management appraisals, and talent management.  Egon Zehnder International's clients range in size from the world's largest corporations to emerging growth companies to government and regulatory bodies and major educational and cultural organizations. Egon Zehnder International has sector specialists organized into global practices. These include Industrial, Financial Services, Consumer, Life Sciences, Technology & Communications, Services, Private Capital and Sovereign Wealth Funds. For more information visit  www.egonzehnder.com.

SOURCE Egon Zehnder International



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