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July, 1998 - Volume 2, Number 10
Effective Governance of International Firms
Companies operating across borders face a host of challenges that domestic
firms generally avoid, ranging from different business cultures to unpredictable
political events. Just ask any multinational manager responsible for operations
in Indonesia or Malaysia during the past year. Such challenges place a
premium on getting the company's governance right to ensure that top management
is adept at understanding and capitalizing on its international operations.
Drawing on data for 258 large U.S. companies in 1992, academic researchers
Gerard Sanders and Mason Carpenter show that multinational firms have
evolved distinct governance practices in response to their international
challenges. Sanders and Carpenter compare firms with high and low sales
in foreign markets, many and few assets abroad, and numerous or no foreign
subsidiaries. Net of other factors such as company size, diversification,
and return on assets, the researchers find that the greater the firms'
international operations, the greater is the
- level of the chief executive's compensation;
- fraction of the CEO's compensation that is long-term
(largely stock based);
- size of the top management team and its governing
board.
By inference, firms that are globalizing should consider enhancing their
executive compensation to reflect the greater complexity of the environment
that must be managed; increase the fraction of the compensation that is
multi-year to foster long-term strategic thinking; and bring additional
directors onto the board and more executives onto the top management team
to master the great variety of information that must be absorbed. Put
differently, companies operating across national boundaries require distinct
director and executive practices to take advantage of a cross-national
world that is richer in opportunity but also more challenging to manage.
Source: W. Gerard Sanders and Mason A. Carpenter, "Internationalization
and Firm Governance: The Roles of CEO Compensation, Top Team Composition,
and Board Structure," Academy of Management Journal, 1998, Vol.
41, No. 2, pp. 158-178.
Hot Teams Win
Warren Bennis's newest book on leadership focuses not on the individual
calling but on the leadership of "great groups," hard-charging teams that
revolutionized or upended their fields. Bennis previously authored "On
Becoming a Leader" and "Learning to Lead," and this work, written in collaboration
with Patricia Ward Biederman, a staff writer with the Los Angeles Times,
tells the story of seven teams:
- the Walt Disney studio that created the full-length
animated film, Snow White and the Seven Dwarfs;
- the groups at Xerox's Palo Alto Research Center
and Apple Computer that pioneered ways of making computers easy to use;
- the 1992 political campaign of Bill Clinton for
the White House;
- the engineers at Lockheed's Skunk Works that developed
the stealth bomber, U-2, and other advanced aircraft;
- the faculty and students of the avant garde arts
school, Black Mountain College;
- and the scientists and engineers of the Manhattan
Project that created the atomic bomb.
Bennis and Biederman use their richly-elaborated accounts of these hot-house
groups to tell us what has worked to produce their remarkable results.
In the case of the Disney studio, for instance, it was Walt Disney's insistence
of quality product; for the Manhattan Project, it was Robert Oppenheimer's
mobilization of quality talent; for the Clinton campaign, it was James
Carville's unrelenting focus on instant response. Taken together, the
authors find more than a dozen enduring lessons in the experience of the
seven teams, including:
- The leaders of great groups "love talent and know where to find it."
- Great groups believe their mission is vital, transcendent, even holy.
In building the team to create the Macintosh Computer, Apple's Steve
Jobs promised its members that they were about to "put a dent in the
universe."
- Great groups are islands -- creating their own worlds -- but they
also maintain bridges to the mainland.
- Participants see themselves as underdogs, but they are also optimistic
and determined to deliver the result. Said Jobs: "Real artists ship."
Source: Warren Bennis and Patricia Ward Biederman, Organizing
Genius: The Secrets of Creative Collaboration (Reading, Ma.: Addison-Wesley,
1997).
Creating, Managing, and Leading Corporate Value
Wharton Executive Education is presenting a three-day open enrollment
program in the "Creation of Corporate Value" -- and building the financial
management and executive leadership to produce and sustain it. Offered
in collaboration with the International Centre for the Study of East Asian
Development (ICSEAD), the program is scheduled for January 14-16, 1999,
in Kitakuyshu, Japan. Wharton and ICSEAD offered a three-day program in
Japan on "Corporate Strategy and Management in an Era of Globalization"
this past January that drew managers primarily from Japan but also from
China, Thailand, and Vietnam. Information on the 1999 program is available
from Executive Education's representative in Japan, Yumi Wakayama at
wakayama@gol.com.
Painter Georges Braque on his collaboration with Pablo Picasso: We're
like "two mountaineers roped together."
Jerry Garcia of the Grateful Dead: "You do not merely want to be considered
just the best of the best. You want to be considered the only ones who
do what you do."
Wayne Gretzky: "You miss 100 percent of the shots you don't take."
Henry Ford: "If you think you can't, you're right. And if you think you
can, you're right."
Karl Wallenda: "Being on the tightrope is living; everything else is
waiting."
Source: Warren Bennis and Patricia Ward Biederman, Organizing
Genius: The Secrets of Creative Collaboration (Reading, Ma.: Addison-Wesley,
1997).
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