The Changing Role of Directors in a Globalizing World

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Oct 13, 2015
by Heather Jaber
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The Changing Role of Directors in a Globalizing World

Fellows gathered to discuss the changing role of the director and its implications in an increasingly globalized world

Salzburg Global Seminar launched its inaugural session of the new multi-year series Salzburg Forum on Global Developments in Corporate Governance from October 1 to 3. The first session, Corporate Governance in the Global Economy: The Changing Role of Directors, hosted discussions about modern conceptions of the director in today’s economic landscape.

The program invited 50 directors, senior managers, lawyers, judges, regulators, policy-makers, and academics from 16 different countries. Participants were able to discuss their own professional experiences under Chatham House Rules, which provided a comfortable and open setting to share diverse and diverging opinions.

Salzburg Global President Stephen Salyer opened the program by highlighting the way that corporate governance is shifting in a globalized landscape. “We know that corporations are operating globally and that governance systems are converging in some respects," he said. "But the people within them remain diverse, with different values and cultural assumptions."

The age-old question of tensions between profit maximization and community needs was considered, contrasting short and long term business goals and their social and environmental impact. The conversation shifted to the liability and duty of directors, and how more is increasingly expected of non-executive directors. Within these discussions, various geographic and industry contexts were offered as examples. 

Fellows pointed out the pervasive use of a US-centric approach as a perspective on practices of multinational companies, with many expressing the need to recognize non-Western contexts in increasingly globalized markets. Practices in Japan, India, and China were among some of the countries used as contextual examples.

The concept of diversity and its place on a board of directors was debated, and whether diversity of skills and expertise or of characteristics like gender and nationality is more important. “Is diversity important to the board because helps them be successful or because of broader social concern?” asked one Fellow. 

The participants discussed a need for strong leadership skills on boards in the 21st century. Gender, cultural and national diversity may help provide a disruptive element to the mix, acting as a checks and balances system, said another Fellow. “This is the way to achieve that kind of new leadership.”

Part of this checks and balances system may be effective through the appointment of a "contrarian director" whose role it is to act as a "devil's advocate" and look for alternatives that might not be otherwise considered, suggested one Fellow. Rather than simply arguing the opposing side, this director would offer impartial judgement and independent thinking.

Still, the degree of independence may vary from context to context. The Fellows discussed the true meaning of independence, whether that may mean independence from management or from major stakeholders or shareholders. Perhaps it is a “platonic guardian with no economic interest in the firm,” offered one Fellow.

With a more connected world, there are also more economic and business risks to consider. Risk management was highlighted as a vital component of the board today. As one Fellow said, “…we all know that what will bring down companies over the next few years is probably a threat we aren’t thinking about today.”

Salyer stressed the necessity of preparing for the unplanned. "Developing effective corporate governance involves more than clear structure," he said. "We must prepare executives and directors for fast-changing, risk-filled environments, and for ethical decision making under pressure and stress.”

The format for the session did not include the usual featured speakers or panels, but instead took place entirely in structured discussions, both in plenary and small groups. Three members of the program's advisory board led the discussion topics: Robert Mundheim, of counsel to Shearman & Sterling LLP, professor of corporate law and finance at the University of Arizona Law School, and a member of Salzburg Global Seminar’s Board of Directors; John Cannon III, partner in the Executive Compensation and Employee Benefits Group of Shearman & Sterling LLP; and Simon Lorne, vice chairman and chief legal officer of Millennium Management LLC.

The next session of the multi-year series, Salzburg Forum on Global Developments in Corporate Governance II, will take place September 29 to October 1 next year.


The Salzburg Global program Corporate Governance in the Global Economy: The Changing Role of Directors, is part of the multi-year series Salzburg Forum on Global Developments in Corporate Governance. The session was hosted in partnership with BNY Mellon, Goldman Sachs, and Shearman & Sterling LLP and was sponsored by Barclays, LIXIL, Deloitte Touche Tohmatsu, Mars, Potter Anderson & Corroon LLP, the state of Delaware, and Warburg Pincus. More information on the session can be found here: http://www.salzburgglobal.org/go/550