All global companies would like board representation from business leaders with global experience who live in different parts of the world. They’d also like representation from all regions where significant operations exist. Historically, companies addressed the issue by selecting directors who had past international work experience, or who were retired with sufficient time to travel. However, as companies seek to address additional diversity goals, these criteria can limit the potential pool of candidates.
One answer, of course, is to make better use of technology. In the same way that companies are getting better at accommodating remote workforces, companies can look to leverage technology to “shrink the globe” for boards. That said, the periodic nature of board interaction already presents a challenge to developing working relationships among board members and with company executives. Most boards continue to feel that a minimum number of in-person meetings are necessary to cultivate an effective board governance structure.
So, geographic dispersion of directors continues to be a major challenge. How many senior managers with global experience are willing to endure full days of travel to attend board meetings? Not many.
On the surface, a simple solution might be to bifurcate the board pay program by increasing the pay for directors who live more than eight (pick your number) time zones from company headquarters. While this two-tiered structure would address the additional time requirements for far-flung directors, it raises ancillary issues such as proxy disclosure and lack of market prevalence. Short of a bifurcated pay structure, companies might consider other actions, such as:
- Offer first-class travel for the board director and spouse or significant other;
- Cover the cost of staying a few extra days at the hotel used for board meetings;
- Discuss in advance and agree on whether a director can participate in several board meetings by phone or video conference; and/or
- Agree to hold several board meetings at locations that may better accommodate board members who live outside of the US—this approach might be the “spread the pain” solution.
It is safe to say that the desire and need to have individuals on boards with global experience will become more important over time, not less, and practices can’t change unless a handful of companies decide they need to evolve board pay and practices to attract and retain global business leaders. We believe shareholders will embrace different board pay models if a company makes a convincing case for the change. Proxy advisory firms may not support changes quickly, but it is hard to argue that changing board pay and practices to support enhanced governance and oversight is a poor outcome.
Perhaps it’s time to change.
