Boards failing globalisation test


Nov 12 BRR image

In today’s international economy, there is a growing consensus that companies need strong, independent boards full of qualified directors with global experience to sidestep risks and seize opportunities.

But according to a Harvard Business Review blog post by George L. Davis from consulting firm Egon Zehnder, many organisations have failed to make a concerted effort to appoint directors from other countries.

Figures from the latest Egon Zehnder 2014 Global Board Index shows 37 per cent of the revenue generated by companies in the S&P 500 now comes from international sources, an increase of 5.5 per cent since the index was first developed in 2008.

However, analysis conducted by the Harvard Business Review has questioned whether boards are as “global” as their organisations. It found that only 7.2 per cent of S&P 500 directors are foreign nationals, and only 14.1 per cent have had meaningful international work experience.

While it admits that this is certainly an improvement on the 2008 figures, which sat at 6.6 per cent and 8 per cent respectively, it said that boardroom diversity had not kept pace with the demands of international business activity.

Davis says: "Indeed, we found that even at the 100 most globalised companies ­– those that derive more than half of their revenue from non-U.S. sources – the numbers barely improved."

Davis added that the challenges of globalisation is not sector-specific. Instead, it “has more to do with decision-making biases in the process of managing board composition.”

The full analysis can be found here.