S U M M E R 2 0 1 5 Pankaj Ghemawat Herman Vantrappen How Global Is Your C-Suite? Despite globalization, the vast majority of the world’s largest corporations are run by CEOs native to the country in which the company is headquartered. But more executive diversity at the top is sorely needed — and will require sweeping changes in how companies are organized. Vol. 56, No. 4 Reprint #56407
COURTESY OF MICROSOFT SUMMER 2015 MIT SLOAN MANAGEMENT REVIEW 73 How Global Is Your C-Suite? Despite globalization, the vast majority of the world’s largest corporations are run by CEOs native to the country in which the company is headquartered. But more executive diversity at the top is sorely needed — and will require sweeping changes in how companies are organized. BY PANKAJ GHEMAWAT AND HERMAN VANTRAPPEN 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 customiza- tion) and so on. In this article, we look at much less studied individual measures of globalization: the extent to which the man- agers who head the world’s largest corporations — at the CEO level and at the level of the managers listed as reporting directly to him or her (henceforth, the top management team) — are native or not to the country where the corporation is headquartered. The Positive Consequences of National Diversity Are the national origins of those who run the world’s largest cor- porations even worth considering? Despite all the research on “upper echelons theory,” at least some people think not. Some rely on author Thomas Friedman’s memorable characterization of the world as “flat” to aver that everybody, everywhere, is subject to the same forces of globalization, irrespective of nationality. 1 However, the data suggest that most international interactions are, in fact, semiglobalized, and closer to the “zero-integration” extreme than to the “complete-integration” extreme — usually by a wide margin. 2 And in terms of changes, a globalization index that one of us (Ghemawat) compiles annually indicates that current levels of globalization are still below those reached before the global financial crisis. 3 A second, related argument about the irrelevance of nationality focuses on giant corporations that can seem to be “floating above a flat earth” (another phrase of G L O B A L B U S I N E S S Satya Nadella, who was born in India, became CEO of Microsoft in 2014. However, most of the world’s largest companies have CEOs who were born in the country where the company is headquartered.