With multinational organizations growing in influence, how should boards think about governance cross border?

Diligent Institute assembled a virtual panel of accomplished global board directors to answer critical questions about board service, good governance practices, and challenging boardroom situations.

At a Glance

Multinational companies face several governance challenges, including maintaining visibility across regions, navigating distinct regulatory environments, and understanding the cultures in which operations occur. The panel suggests some strategies to tackle international governance head-on.

Discussion

Eugenia Ulasewicz

It’s important to go into a new geography with open eyes. The board must understand the similarities and differences between the geography you currently operate in and the one you’re thinking of operating. The board must also ask itself if it has the right expertise at the table to help the company in both current and future regions. From a governance perspective, you need to establish a process for board oversight. For example, if the company is planning to purchase a business in a new country or begin doing business in a new country, should there be a board governance requirement that a board must approve it first to be sure that everyone understands the risks of operating in a new country and if there is the right expertise and support to enter successfully?

Colin Low

As companies become much more global, they need to be local as well. When we talked about globalization in the past, the conversation was all about understanding and integrating processes across large multinational corporations so that they can grow, scale, and diversify operations in the global grid. At this point, I think global entities need to integrate globally but operate locally. Board directors can be cruising at 40,000 feet, but in order to operate locally they really need to go down onto the ground and understand the processes and cultural practices of each country and identify gaps between the global and local levels. The problem with multinational corporations is that whether they’re American, European, or Asian, they do things in their own way, but a business model will work differently in different places and with different communities. A board that I serve on in South Asia is in eleven different regions, which means eleven different cultures and styles. We coordinate very closely on the local level. To ensure that systemic governance processes are consistent throughout the global entity, you have to fully understand the localities that you operate in.

John Hinshaw

It’s important for management and the board to manage risk internationally and have the right people and policies in place. This can prevent issues with a regulator or government organization that will audit or probe how the company is performing in their country. If you have an operation in a country and its doing something that violates US or local laws, you’re subject to fines, other penalties, and severe damage to the reputation of the company across all geographies. You really need to understand then who you have in those countries, what is the training on policies and practices, and how is it being audited.

It’s also good for the board to get out from time to time and see international operations. One board I’m on has a large operation in Europe and I suggested that we do a board meeting in London instead of the states. It was terrific – we learned a lot about how different things are in London and Europe for that business vs. the U.S. that we wouldn’t have learned otherwise. For example, the way regulators approach business in Europe is often different. It’s one thing to hear about it in a board meeting, but it’s another to see it on the ground and actually meet with regulators and understand their perspective in depth. If you had a board meeting in the states we could fly people in and they would present to the board, but it’s different when you’re in their home country, talking about the issues with them and meeting with employees, and even meeting with customers.

Nora Denzel

I have three suggestions. The first is to include international voices inside the boardroom. All of the boards on which I sit are increasing the presence of non-citizens. The second is to consider your positioning with the various regional governments where you’re operating. For example, if you aren’t based in the US, do you have a presence in Washington and what is your influence there? Third and finally, you should be testing a lot around geopolitical uncertainty. Do we have a reliance on one geography? Is it over weighted? How quickly can we change geography if we need to? It’s important to notice the changing geopolitical landscape and be prepared to react.

Angela Brock-Kyle

The way I think about it is twofold: you want to be aware of, appropriately in touch with, and respectful of the way that different cultures, regions, geographies, peoples, and societies engage. At the same time, you want to always be led by the values that are of import to your company. If you don’t feel that practices in a particular location are in line with what you want your firm engaged in, then you shouldn’t allow business those practices in that particular region. Again, you’re standing up for the values of the company; that is always the bedrock. Be mindful of what others do and be your best self no matter where you are.

Board Panelists

Eugenia Ulasewicz

Eugenia is currently a member of the board of directors at Signet Jewelers, Hudson Group, Bunzel Plc, and Vince Holding Corp. She has also served as a board member of Women In Need and WomensForumNY, and was a Trustee at Burberry Foundation.

Colin Low

Colin is currently the Chair of the Singapore Investment Development Corporation (SIDC), Chairman of the Board for Singapore Mainboard listed Intraco Limited, and US National Board Member for the Cancer Treatment Centers of America (CTCA).

John Hinshaw

John Hinshaw is currently serving on the Board of Directors at Sysco, DocuSign, BNY Mellon, and the National Academy Foundation.

Nora Denzel

Nora is currently a member of the Board of Directors at Advanced Micro Devices (AMD), Ericsson, and Talend SA, as well as a member of the Innovation Advisory Board at BBVA. She has previously served on a number of boards including Saba Software, Overland Storage, TimeSpring, YWCA of Silicon Valley.

Angela Brock-Kyle

Angela is an Independent Trustee at Guggenheim Investments (Guggenheim/Rydex) and the YMCA Retirement Fund. She is also an Independent Director at Infinity Property and Casualty Corporation. She served previously as a board member at United Way and the Executive Women’s Golf Association.

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