Why CEOs Need to Walk the Global Walk
With so much economic growth occurring outside the U.S. it's increasingly important for American companies to have chief executive officers and board members who have lived and traveled abroad, says Brian Sullivan, New York-based chairman and chief executive officer of CT Partners, the executive search firm formerly known as Christian Timbers. Here are edited excerpts from a recent conversation:
What percentage of U.S. CEOs have adequate international experience?
Very few. One of the interesting tests of whether a CEO is truly global is when you look at his passport. If there are a lot of stamps, there's a good chance the guy has an appreciation for differences in cultures and countries. If not, there is absolutely no way they can consider themselves global. You can't just read books. You've got to be on the ground and spend time understanding how business is done in different cultures.
Aren't some of the largest, most global companies run by CEOs like George David of United Technologies (UTX), who has lived or traveled extensively in both Japan and South America?
Yes, it's all a self-fulfilling prophecy. A company is not going to stay as big as United Technologies or any of the Fortune 100 are without a CEO who is global. But some companies consider themselves global just because they have a distribution or sourcing arrangement internationally. If they don't have a CEO playing a leading role, the urgency and the hands-on knowledge of different cultures just isn't there.
Do you think a CEO should actually live abroad at some point in his or her career?
Yes, living and working, not just getting education, but operating a business. The reason is that a lot of growth is going to come from Asia, even hypergrowth like we're seeing in mainland China. Even a Western European who hasn't spent time in Asia is going to be perceived as having the same skills set as an American who hasn't lived abroad. They tend to be rather narrow. They don't have the same insight or perspective.
Are we're going to be seeing more CEOs like Indra Nooyi of PepsiCo (PEP)?
Yes. I get a little pause when people talk American companies vs. European companies and the like. Where a company originated and where a majority of its employees are is not always indicative of whether it should be considered to be based in a single country. The drivers of the business, the drivers of the growth, the people who are putting the most risk capital at work, a hell of a lot of that is coming from non-U.S. sources by non-U.S. managers. So, yes, these people are becoming integral to the growth of the enterprise.
Has the composition of boards changed in response to the global imperative or are they U.S.-centered?
Members tend to be too U.S.-centered, but if you compare the situation with the way it was 5 or 10 years ago, they are dramatically more global now. One problem is that it's damn hard to get boards together for four to six meetings a year if someone has to travel 24 to 36 hours to get there. You can attend the meeting telephonically. But it's very difficult to get the caliber of executive that you want from other regions unless their travel schedule happens to coincide with your board meetings. That's why people already on U.S. boards who have worked in other parts of the world are key targets for us. Their thinking does really influence the global direction of an organization.
Haven't some boards started having meetings in countries other than their home market?
I haven't seen it. If you have seven board members in the U.S. and three in Europe, it's difficult to justify packing seven people up to go to a different site. What's more prevalent is looking for the right backgrounds and experience.
Who stands out as a model of a CEO who has gotten the global equation just right?
Sam Palmisano at IBM (IBM) is a perfect example. When you look at IBM's growth, it's truly global. What they're doing is massive. They have a combination of an organic global growth strategy combined with a heavy software acquisition story. They're doing it around the world. They're looking at the world as one big market, vs. trying to drive all the decision-making and all the acquisitions from the U.S.
Would it be fair to say that the assumption at IBM and comparable companies is that growth is not really going to occur at home?
A lot of it is going to hinge on China and India as their standards of living improve and their consumption per capita increases. We in the U.S. have long had the most bodies with the most amounts of money. But these other countries are going to be huge consumers of…everything that moves. We're going to have to react to it.
In general, doesn't it seem that more Indians are rising to the top in U.S. corporations than Chinese are?
A lot of it starts out with language. The Indians have so many dialects that English is the common denominator for Indians from different part of India. That gives them better access to our higher education and they tend to stay here. Right now, what's holding back Chinese nationals—in addition to the fact that just a few years they were communists and may still be—is that they don't have the discipline in English and don't have the Western education that the Indians do.