October 19, 2016 – Overseas experience has become an increasingly common requirement in searches for new CEOs of international companies. Without it, prospective chief executives may be holding their career back.
A new white paper report released by DHR International finds an increasing number of companies are seeking leaders with global vision. The study was authored by Frank Smeekes, who serves as DHR’s managing partner and region head for Europe. Mr. Smeekes has more than 20 years of international search experience and has completed over 400 senior level placements across the U.S., Europe and Asia.
To check on how far this trend has come, Mr. Smeekes and his team at DHR combed the career histories of chief executives at the 100 largest European companies by sector, including leading French, German and British listed companies.
Increasingly Valued Experience
Their findings confirm that a CEO who has experience of moving to a new market as a senior executive, before taking on the role of CEO, is increasingly valued in businesses across Europe. Therefore, the implications for individuals considering whether they should add that international perspective to their biography are obvious.
DHR’s research also looked at whether the CEOs of the European companies are, themselves, becoming more international. Are the biggest French, German, Swiss, Italian and British companies making more use of CEOs from outside of the company’s home base? Here’s some answers:
- The percentage of CEOs in the top 100 largest European companies with overseas experience has risen from 60 percent to 66 percent in the last 10 years;
- Amongst Germany’s DAX 30, 87 percent of CEOs have overseas experience versus 77 percent 10 years ago;
- Amongst France’s CAC 40, 63 percent of CEOs have overseas experience versus 53 percent 10 years ago;
- The number of CEOs with international experience in the Netherlands has increased to nine out of 10, as opposed to eight out of 10 in 2006;
- Businesses in France and Germany tend to prefer home grown CEOs. The percentage of French CEOs in French companies has risen from 85 percent to 90 percent in the CAC 40 over the last 10 years. In Germany the percentage of German CEOs in the DAX 30 has risen from 77 percent to 80 percent;
- The number of British CEOs within the FTSE 100 has reduced over the last 10 years, from 71 percent to 60 percent;
- Cultural variations in business practice can influence CEO selection. In Germany, the geographical distribution of stakeholders means that a deep local knowledge is more highly valued. Similarly, French governmental involvement in businesses and shareholder distribution means that domestic knowledge is highly prized.
- Across Europe, while the need for international experience is increasingly key, the use of non-domestic CEOs is more mixed.
“More than ever, shareholders in Europe ask for an agile, responsive, international experienced CEO – an executive who knows what it is to navigate through unknown or untreated waters,” said Mr. Smeeks. “International experience is therefore key.”
Portion of CEOs With Overseas Experience In European
Companies Has Risen Over the Last 10 Years
European Companies Open to Foreign-Born CEOs
One way to ensure that a CEO candidate has an international perspective is to hire from overseas, although this does not always guarantee international experience at the executive level.
DHR’s research suggests that Europe’s largest companies are now more open to the idea of hiring foreign-born CEOs, with the proportion of home-grown CEOs falling from 78 percent in 2006, to 63 percent this year. This drop highlights that generally across Europe, companies are opting for candidates with knowledge of overseas markets.
Further research into the FTSE 100 found that the proportion of U.K. companies with home-grown CEOs dropped from 71 percent in 2006 to just 60 percent in 2016. This trend mirrors that of Europe as a whole, as U.K. companies also look to ensure they have people with greater international experience at the helm.
Here are two examples of foreign-born chief executives in the U.K.:
- Jes Staley is CEO of Barclays and an American national. He worked in J.P. Morgan Asset Management’s Latin America division from 1980 to 1989, where he served as head of corporate finance and general manager for Brazil for eight years. In 2013, Mr. Staley left J.P. Morgan after more than 30 years to join BlueMountain Capital in London as a managing partner. In 2015 he was elected to the board of directors of the Swiss global financial services company UBS and served as a member of its human resource & compensation committee and risk committee;
- Bill Winters is the American CEO of Standard Chartered. He has had a distinguished career in banking, having spent 26 years with investment bank JP Morgan in diverse leadership roles, becoming co-CEO of the investment bank in 2004. He stepped down in 2009. Mr. Winters was invited to be a committee member of the Independent Commission on Banking, established by the U.K. government in 2010 to recommend ways to improve competition and financial stability in banking. Subsequently, he served as an advisor to the Parliamentary Commission on Banking Standards and was asked by the Court of the Bank of England to complete an independent review of the bank’s liquidity operations.
Bucking the Trend: France & Germany
Unlike most other European companies, those based in either France or Germany have a tendency to opt for domestic CEO candidates with greater local knowledge; however, experience abroad still comes highly valued.
In France, 90 percent of CEOs in the CAC 40, the French stock exchange, are French nationals. This figure is up from 85 percent 10 years ago. These figures highlight that the focus on hiring home-grown CEOs has risen rather than dissipated, despite the trends that exist elsewhere in Europe.
DHR’s analysis of the German stock exchange, the DAX 30, found similar results. In the same period, the number of German-born CEOs operating in German organizations has risen from 77 percent to 80 percent.
Similar trends have been found in other European countries. In the Netherlands, the number of CEOs with overseas experience has remained high, increasing slightly, with nine out of the 10 biggest Dutch companies employing CEOs with international experience in 2016, as opposed to eight in 2006. Despite this level, the number of foreign born CEOs has decreased. Out of the 10 biggest Dutch companies, seven of them had CEOs from the Netherlands in 2016 compared to three in 2006.
Proportion of Home Born CEOs In Listed Companies
How Culture Variations Impact CEO Choice
According to the latest figures from the Office of National Statistics, only 46.2 percent of U.K. company shares are owned by domestic investors, down from 56.6 percent in 2010. These figures go some way into explaining why, in the U.K., the decision of a company to have a foreign-born or overseas experienced CEO has risen.
Due to the growing proportion of international shareholders, CEOs of U.K. companies, in particular, need to possess experience in overseas markets. It is important that CEOs not only understand the markets they operate within, according to the DHR research, it is important for them to have a strong understanding of the desires and differences between their international investors as well.
According to Banque de France, the latest figures show that 54.7 percent of French company shares are owned by domestic investors. With less shareholders coming from overseas, the necessity to hire CEOs from overseas is reduced. The same is true for other countries that have high levels of local stakeholders in their businesses.
Similarly, in France, cultural traditions have had a massive influence on day-to-day business operations. The French government exerts more influence over local businesses than many other governments. This governmental involvement is much higher than is the case for the U.K. CEOs in France may therefore need to be more adept at communicating and dealing with their own government than their U.K. counterparts.
In Germany, corporate structures are very different to that of the U.K. There are two boards of directors, the management board or the Vorstand, and the supervisory board known as the Aufsichtsrat. The members of the Aufsichtsrat are drawn from the regional economy, which may include representatives from regional government, union groups and regional banks, and their role is to act as a monitor for the management board.
The ability of a CEO to deal with and communicate successfully with such representatives is extremely important in this instance, and therefore favor would be given to those candidates with local knowledge of the system. Such a system does not exist in the U.K., therefore the same value is not necessarily placed on local knowledge.
Here are five examples of CEOs with overseas experience in France, Germany and the Netherlands:
- Herbert Hanier, the German born CEO of Adidas, joined Adidas Germany in 1987 and has held numerous management positions within the group across several global markets, including managing director Germany and SVP for sales and logistics in Europe, Africa and the Middle East;
- In France, L’Oréal CEO, French national Jean-Paul Agon graduated from HEC international business school, joining L’Oréal in 1978. He has spent his entire career in prominent sales and marketing positions across several growth markets with the company, including Greece and Asia;
- John Cryan is the British born CEO of Deutsche Bank. He was president for Europe at Temasek Holdings Pte. Ltd., the Singaporean investment company, from 2012 to 2014. Previously, he was group chief financial officer at UBS AG from 2008 to 2011, having worked in corporate finance and client advisory roles at UBS and SG Warburg in London, Munich and Zurich from 1987;
- Carlos Tavares is the Portuguese CEO of French car manufacturer Peugeot. He held a number of different positions with the Renault Group from 1981 to 2004 before joining Nissan. In 2009, he was appointed EVP, chairman of the management committee Americas and president of Nissan North America;
- Jean-Francois van Boxmeer is the Belgian CEO of Dutch brewer Heineken. He joined the company in 1984 and held various management positions across the world, including in Rwanda as sales & marketing manager, in the Democratic Republic of Congo as general manager, in Poland as managing director, and Italy, also as managing director.
Across Europe, a similar trend exists that suggests gaining overseas experience, although not mandatory, is likely to aid in future senior executive career progression. Those looking to take on non-executive roles in the future may also look to develop and enhance their backgrounds by gaining overseas experience in order to set them apart from other candidates.
Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media and Dale M. Zupsansky, Managing Editor, Hunt Scanlon Media