Foreign non-execs seem to be in demand - but few are in situ.
A couple of years ago headhunters Whitehead Mann carried out a survey of major British companies with foreign non-executive directors on their boards. Some 40% of the respondents already had one or more NED from overseas, and 44% of the rest had plans to recruit one. But these plans do not seem to have advanced very far. Among the FTSE-100 companies, more than half still have no NED from abroad, even though enthusiasm for such appointments seems as strong as ever.
It's rather odd therefore that so many headhunters should be reporting a significant demand for overseas non-executives. Last year 10% of the non-executive appointments handled by Spencer Stuart, for example, involved foreign directors. In most cases, says chairman David Kimbell, clients were looking for local knowledge - such as insight into the economic, legal and governmental workings of a particular market. It was partly to help guide its continued expansion in the US that WH Smith recruited a couple of Americans - DHL chairman Patrick Lupo and Marjorie Scardino, chief executive of The Economist Group - both of whom have expertise in retail publishing and distribution.
But specialist knowledge is only a beginning. 'For a large company playing in a world market, a foreign national can bring an extra level of thinking and decision-making to the board that can be extremely valuable,' says John Harper, professional development director at the Institute of Directors. Foreign NEDs 'bring a different mind-set', thinks Anthony Saxton of executive search consultants Saxton Bampfylde. 'The issues that they routinely deal with in their own countries may be very different to what they find here. If, for example, you're a high-cost producer who wants to sell internationally, then a German non-exec would be very useful. It's what they have done very successfully for a long time. Similarly, Americans are accustomed to looking at Europe from the outside, as a single entity, and in that sense are perhaps quicker to spot where the opportunities lie.' So far only three FTSE-100 companies have non-execs from the Far East, and it's not altogether surprising that all three should be banks. Hongkong and Shanghai and Standard Chartered both have roots in Hong Kong. Barclays' appointment of Shijuro Ogata, a former deputy governor of the Japan Development Bank, is easily explained by his knowledge of the regulatory aspects of banking in the Far East. Logistical hurdles - involving at least two days travelling to and from the UK - are an obvious impediment to the appointment of Asians.
There are cultural reasons as well to explain the rarity of Asians. They have traditionally had less interest in acting as non-executives, points out David Kidd, managing director of ProNed. 'Unlike the West, where non-executive directorships are recognised as giving valuable experience, in the Far East they play very little part in enhancing the executive's career.' Of course, certain British companies have had boards embracing different nationals over many years. In some cases the foreign directors arrived as a result of an acquisition. BOC's takeover of Airco in the late 1970s introduced Richard Giordano and Crocker Nevin. (The former became chief executive and later chairman, while the latter was Britain's longest-serving foreign NED until his retirement this year.) Guinness's stake in LVMH brought it Bernard Arnault. Other businesses simply have a longstanding appreciation of the value of an outside view. Volvo's Pehr Gyllenhammar has been a non-exec at Pearson since 1983 and at Reuters since 1984.
Whatever happens, the incidence of outsiders looks set to increase. 'When the board of an international company asks whether its range, knowledge and experience would be significantly enhanced by the contribution of a non-executive from overseas the answer is invariably "Yes",' says Jonathan Charkham, a member of the Cadbury Committee. 'I expect that question to be answered in the affirmative more and more - and for genuine as opposed to token reasons.'.