International crises increase the need for non-U.S. board members.

The global challenges for boards have grown exponentially over the last two years. The constantly evolving relationship between the U.S. and China, Russia’s invasion of Ukraine, COVID’s continuing effect on global supply chains and the worldwide concern over the effects of climate change are just a few of the issues that suggest American corporate boards could use the perspective of international directors. But why is it worth the extra effort to engage international directors, and what sorts of companies would prosper most by including them on their boards?

Diversity of Thought and Background

Just as boards can benefit from gender or ethnic diversity, there are many advantages to including directors who can add a global perspective. Selena LaCroix, chair of the compensation committee for Renesas Electronics, board member for NACD’s Texas chapter and vice chair of the technology practice for Korn Ferry, explains the benefits. “International directors bring a diversity of skills, experience and approach to a board that will lead to a more well-rounded board of directors. They can also supply the corporation with valuable insights, business contacts and networks that are unique to the geographic areas that they have experience in.”
 
This is echoed by Luis Aguilar, former commissioner at the SEC and board member of Donnelly Financial Solutions Inc. and Envestment Inc., who finds particular value in the insight that international directors bring to boardroom discussions.

“The diversity of thought and experience an international director can bring generates discussions and ideas that can be very useful in helping a board to determine the best solutions or courses of action to enhance stakeholder value.”
 
At the same time, finding the international director who is right for your board is not a “one-size-fits-all kind of thing,” according to Jan Babiak, who serves as director and audit committee chair for Walgreens Boots Alliance, while acting as an international director herself for both the Bank of Montreal and London’s Euromoney Institutional Investor PLC. “Just looking for someone who is international doesn’t necessarily bring value. Like you do with any other board metrics, you sit down and look at the skill sets you might be looking for. I think the top benefit is going to come from knowing your business need. That would be my starting point.”

Who Benefits?

When asked what sorts of companies would benefit most from the presence of an international director on their board, Adalio Sanchez, director for Avnet, ACI Worldwide and Snap One Holdings, keeps it simple, pinpointing “companies that have non-U.S. operations or have the intent to establish operations in particular regions of the world.” 

LaCroix attributes the most value to multinational corporations boasting a global employee, customer and supplier base. “I see this not only as a benefit but an imperative for multinational corporations to have international representation and a true understanding of the area they serve.”
 
Aguilar identifies local culture, politics, regional economic considerations, workforce labor issues, and social and legal frameworks as areas international directors can help illuminate for U.S. boards. “This knowledge can be very important in identifying, evaluating and addressing risks faced by the company.”

Ideal Traits for International Directors

Kalpana Raina, board member of both Words Without Borders and Information Services Group, believes that, for the most part, the traits that make for an effective international director match those required of all directors. While she zeroes in on curiosity as one of these universal traits, she does caution nom/gov committees to strictly monitor fit when considering a director from another nation.

“You have to be more careful to examine the director’s ability to mix with your team. Getting on with the other board members is magnified with international directors.”

As one would expect when someone takes on a board director role in a country outside their native land, communication skills are key, whether that is a nuanced skill like effective listening or something more obvious, such as being able to speak and understand the language spoken in the boardroom. 

“For an international director, it would be good to listen more and make sure they understand the nuance of the culture of the board and the company. They have to focus on communication, especially if the board meetings are not conducted in a language they are fluent in,” says LaCroix. At the same time, while she stresses the ability to take in information, she does not believe that means to be seen and not heard. “They should also be willing to speak up, especially as it pertains to their area of expertise, even if they are the sole dissenting voice in the room.”

According to Aguilar, an international director’s communication skills must be gauged during the interview process, as should their availability for board meetings and calls because of their location or time zone. “Unfortunately, not all countries have the same transportation, internet or communication infrastructures.”

To drive home the importance of language skills to being successful as an international director, Babiak details an experience in her own board service, during which she interviewed for a board that included four Italian speakers and four French speakers. While the board and committee meetings were held in English, during the interview, the board members frequently dropped into their native languages. Right then, Babiak knew that the role was not for her.

“I just said to them, ‘Look, I am very excited about the opportunity, but I note your tendency to revert to your native tongue to get better understanding on a matter often leaves me out of potentially critical discussions.’ I gave them the name of a wonderful Belgian woman who is fluent in English, French and Italian. I just thought the risk profile was too great for me. They loved me because I had Italy and France reporting to me over the years, but I said, ‘Yes, but they were reporting to me in English!’”

Factors Underlining the Need for Global Experience

A number of factors are teaming up to increase the importance of international directors to the boards of U.S. public companies. Raina identifies both the COVID-19 pandemic and Russia’s invasion of Ukraine as factors requiring companies to pivot quickly on supply chain issues. These disruptions have posed enormous challenges for businesses but have also accelerated the need to evolve processes and strategies.
 
Aguilar says, “The level and speed of change that corporations face today is unprecedented, and the competitive and regulatory environments require more prompt decisions by boards. But the decisions have to be well thought out. Having an international perspective at the board table can enrich the conversation and expedite the process of reaching an informed decision.” 

With technology making the world smaller, companies have been able to more quickly globalize their operations, resulting in a more international customer base and supply chain. As public companies gain worldwide reach, LaCroix believes it is imperative for their boards to mirror the international nature of their client bases.
 
“You need to represent the constituents of the business. ESG has also taken on an increased importance and scrutiny. International directors will certainly play positively on the diversity and governance aspects of ESG.” 

To Babiak, the importance of international directors hasn’t increased but simply has gained more recognition as corporate governance has evolved. Looking back to the days “when boards were made up of interlocking CEOs who sat on each other’s boards and all played golf together,” she believes that boards now have a better idea of the representatives they need on their boards to ensure success for their companies.
 
“We need international experience and people who understand supply chain. We need people who understand finance. We need people who have some legal background in risk assessment. We need somebody who can chair an audit committee. If you are a company that had big international operations, you should have always had international directors. So, I don’t know if it’s more important, but it’s now higher-profile.” 

Finding International Directors Isn’t Hard

So where does the board find qualified international directors? 

Raina believes that part of the reason for a lack of international directors lies with nom/gov committees.
 
“U.S. companies have very few nom/gov committees that get out in front of board recruitment. We tend to do it on an ad hoc basis. In actual practice, people fill in seats as they come up, and you are looking to find board members quickly.”
 
LaCroix recommends that nom/gov committees prepare a clear outline of the type of international director the company needs. “They should engage the services of a board recruiting specialist with the relevant global networks in their regions of interest so they can do a thorough job of identifying a pool of candidates for the committee to prioritize and shortlist.”

One thing is certain. Don’t tell Jan Babiak you can’t find any qualified candidates.

“There are thousands of them. There’s a huge oversupply, particularly of diverse candidates as well as traditional candidates,” says Babiak, citing both the NACD and Women Corporate Directors as possible resources. “It requires you to look outside of the men’s locker room to find the candidates. All you need to do is define the category and go look. The reason someone can’t find somebody with good international experience is the same reason they can’t find anyone of color or any women or anyone with ESG experience. All you have to do is look.”