Director's Handbook

Governing the Global Company

By NACD and Marsh McLennan Companies

12/15/2015

Partner Content Provided by Marsh McLennan
Board Composition Director’s Handbook Strategy and Risk Board Operations

The report set out to answer a core question: Does a global company need a global board? The answer, based on the feedback and insights of directors interviewed for this report, is an unequivocal “yes.” Yet that answer served to raise further questions: What is a global company, and how should a global board be defined?

There is no single definition that sets a truly global company apart from those that are “multi-national”—that is, domestic companies with international operations. Directors shared their views on the characteristics of a global company and the top governance challenges. Governance of the global company can be summed up in one word: complexity.

As globalization continues, the geographic diversity of boards will also increase, as companies seek more directors with international experience. For example, 35 percent of the 339 new board seats of Fortune 500 companies in 2014 were filled with directors with international experience.1 This will have implications for board practices, director skill sets and more. Our research tapped insights of directors around the world—whose companies are headquartered in Asia, Europe, and North America—to capture their experiences and perspectives on the characteristics that distinguish a truly global company, and, in turn, what makes a “global board.” Based on interviews with close to 30 directors, representing 16 Global Fortune 500 companies and 25 Global Financial Times 500 companies, this report sets out peer perspectives on the challenges and opportunities of participating on a global board and the critical skill sets for a global director. Finally, we captured advice for directors who may be joining the board of a global company for the first time. A full list of research participants is on page 32.

The global board and its directors share many of the responsibilities, skill sets, and requirements of all high-performing boards. However, our interviews highlighted the need for boards to respond to global governance demands and complexity in three ways: board composition with an emphasis on increasing geographic diversity and international experience; board processes and the importance of well-planned agenda and site visits; and the expertise of individual directors, including an expanded time commitment and a true sensitivity to cultural differences.

Key findings and takeaways include:

  • Top issues for global-company boards:  oversight of risks (including geopolitical, legal and regulatory) and the extended talent pipeline
  • Imperatives for global-board composition, including the importance of geographic diversity
  • Considerations for the global-board recruitment process: questions for boards and for prospective directors
  • Critical boardroom processes in the global context, including agenda development and the flow of information into the boardroom

The research highlights the need for companies to ask: Where are we on the journey to becoming a truly global company, and is our board properly shaped for our global mission? 

 

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