Diversity may be a buzzword for enterprises across the world and for their boards, but there is still not much diversity in nationalities in enterprise boards. The cultural differences that different nationalities bring about will significantly impact the overall performance of a board. Several researches point to this direct correlation.
Individual directors of different nationalities behave differently under the same situation and will help understand the difference in cultures across the relevant markets. This is helpful for the enterprise to act accordingly in competitive environments. Such a diverse group could also help in understanding global stakeholders, the markets and of course the risks associated with such actions.
Independent directors from a foreign country are more prepared for board or committee meetings, regular and prompt, and are generally more active in taking keen interest in the board affairs. They seem to want to show how committed they are to governance. Several GCC boards have shown this trend.
Such directors also are likely to promote products and market expansion, geographic width and diversity for innovation within the organisation. Those with a variety of interests and associations are good at creating better bonding with various investor groups, analysts, suppliers and consumer groups.
Even in a post-pandemic world, even with trade barriers of all sorts, the interdependency of the world is here to stay, and maneuvering that needs skill sets that a diversified nationality board can bring on. Such directors can help increase the scope for expansion and growth at a time operations are low key and driven by national passions like the one India has tried against China.
The cultural issues and language barrier may prop up as challenges to smoother board meetings – Especially if there are expert individuals who may not be adequate in languages other than their native one. We see this typically in the GCC and some European countries.
Several boards have addressed this issue in different ways: The board information packet is normally prepared in a language that is most spoken in the country where the enterprise is based. Highlights are translated to those who do not know the native language – typically to English. No board has so far done more than four language translations, to our knowledge.
In the GCC, Arabic being the official language, the translation is typically done to English side by side. Most Indian firms have the information packet in English and some in Hindi too. Getting lost in translation is a likely side hazard and good translations cost too. So most boards try to minimise the outlay by sticking to one or two translations.
There are good translation facilities available today for boards to use in meetings as well as for documentation. The question is how to optimise the costs. Our recommendation is to have one other language translation other than the native one for the broad benefits of other nationalities. The exception could be when you have a major investor who knows only one language, say a rare dialect of Mandarin and nothing else.
Here are some dos and don’ts for cultural difference. This is not an exhaustive list as specific cultural nuances are far too many to list here.
· Analyse the variations that exist in the board in terms of nationalities and cultures, and how much such differences impact the board functionality.
· Develop protocols and decide on SOPs in order that all the directors understand how board and committee meetings will be run.
· Encourage those other nationality directors to step out of their cultural comfort zones by perhaps devising some incentives around what is desired for better and smoother governance.
· Be judgemental on how people from certain nations are supposed to behave – such as the much-talked-about head nods of Indians. Director-level folks are capable of adapting to alien work ethics and cultures to some extent.
· Underestimate the criticality of boards functioning as a team. Not persuading directors to get to know each other outside of the boardroom in order to sensitise on the cultural and language differences and difficulties.
· Insist on one-dimensional dynamics at board in meetings. Shut off other directors’ opinions on proceedings just because they are from another country, or not give time for native-language-challenged members from giving their feedback.
Ralph is a global board advisor, coach and publisher. Muneer is co-founder of the non-profit Medici Institute and a stakeholder in the Silicon Valley-based deep-tech enterprise Rezonent Corp