How Global Is Your C-Suite?

The globalization of companies can be — and frequently has been — looked at
in different ways: in terms of the internationalization of sales or assets, cross-border
supply chains or shared services, organizational structures, functional policies (marketing
standardization versus customization) and so on. In this article, the authors look at much
less-studied individual measures of globalization: the extent to which the executives who
head the world’s largest corporations — at the CEO level and at the level of the managers
listed as reporting directly to the CEO — are native or not to the country where the
corporation is headquartered. Some studies indicate that national diversity in the top
management team can be associated with better performance. What’s more, the presence — or
absence — of nonnative executives in a company’s top management team can send a signal to
employees outside the home country about the long-term career prospects for foreign middle
managers already in the company as well as for potential hires. The basic pattern emerging
from the authors’ research, both at the CEO and the top management team level, is
unmistakable: Even at the world’s largest companies, natives generally rule the roost. In
2013, 67 of the Fortune Global 500 companies (13%, or about one in eight) had a foreign-born
CEO. The share has barely budged since 2008. Looking at the full top management teams, the
authors found that on average 15% of the top management team members, excluding the CEO, are
nonnatives. The authors examine some of the possible reasons for this and look for
correlations that may explain why certain countries have higher rates of nonnative CEOs.
They then examine several levers for enhancing a company’s ability to deal with
international differences and distances.