Oil report

Lifting the Lid-US firms struggle to globalize the boardroom

NEW YORK, Dec 2 (Reuters) - International markets are a growing source of business for many U.S. companies, but attracting non-U.S. citizens to Corporate America’s boardrooms -- and keeping them there -- is proving to be tough.

Global representation on boards of directors is seen as key for companies that do a lot of business abroad, because such diversity provides a wider perspective on the international economy and other issues, board experts say.

But new data shows many big U.S. corporations that register a big chunk of their revenues from international markets have few or no foreign nationals on their boards. Boards of directors are charged with overseeing how companies are run and serving as watchdogs for shareholders’ interests.

Foreign nationals represented only 6.6 percent of board members at companies in the Standard & Poor's 500 index .SPX, while S&P 500 companies overall got 31.6 percent of their total revenue from international markets in the latest fiscal year, according to a new report from Egon Zehnder International, an executive search firm.

The figure rises slightly, to 8 percent of board members, for the 380 companies that disclosed non-U.S. revenues, the study found.

Among the S&P 500 companies with significant international sales, but no foreign nationals on its board, is Exxon Mobil Corp XOM.N, according to a list accompanying the study. Exxon spokesman Alan Jeffers said the oil company's current 11-member board comprises U.S. citizens only, but previous members included non-U.S. citizens.

Corporate governance experts say multinational U.S. companies generally want more global representation on boards, but that it can be hard to find the right candidates with the time and willingness to take on director duties.

When directors must hop on a transatlantic flight to attend a board meeting, that makes it all the more difficult, they say.

“Someone who has exposure to other cultures and countries is probably helpful” to have on boards, said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “The problem with it is, frankly, time and space.”

Particularly at a time of global financial crisis, getting qualified overseas business people to serve on U.S. boards could become even more difficult.

At Ford Motor Co F.N, for instance, long-time board members John Bond, nonexecutive chairman of Vodafone Group Plc VOD.L, and Jorma Ollila, chairman of Nokia Corp NOK1V.HE and Royal Dutch Shell Plc RDSa.L, stepped down in October to focus on responsibilities at their own companies.

Another challenge in inviting non-U.S. citizens to U.S. public company boards is making sure that they understand the requirements of U.S. corporate governance rules and securities laws including prohibitions on insider trading.

In one high-profile case brought by the U.S. Securities and Exchange Commission, prominent Asian banker and former Dow Jones board member David Li agreed in February to pay $8.1 million to settle civil charges of insider trading ahead of a buyout bid for the media company by News Corp NWSa.N.

Li, who as a Dow Jones director learned of the bid before it was formally announced, was accused of divulging the news to a friend in China before the offer became public. He settled the case without admitting or denying the charges.

The Egon Zehnder study also found positive correlations between a company’s international board representation and overall financial metrics such as return on assets and annual average stock price growth.

While there is no clear link between the current economic crisis and the globalness of boards, the lesson of the past few months is that business and markets are international and interconnected, said George Davis, co-manager of Egon Zehnder’s National Board Practice Group.

“We have to be very careful not to be closed-minded into thinking that only Americans have insights into global markets,” he said. “Usually people on the ground who come from those cultures offer a plethora of ideas.” (Reporting by Martha Graybow; editing by Richard Chang)