Richard Northedge

In the boardroom | 14 November 2009

A trade deficit in chief executives

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One of the oft-repeated excuses for high executive pay is the need to compete for top talent in an international market. A scan through a list of heads of FTSE 100 companies certainly shows just how many boards go abroad for their boss: 41 of the UK’s top 100 chief executives are foreigners, including three who are now naturalised Brits. They come from 14 different countries, from Mexico to the Ivory Coast and India. But a market ought to be a two-way exchange, and while we import senior managers from overseas, where are the British businessmen heading foreign public companies?

There is a serious trade deficit in boardroom bosses. Are there barriers that block Britain exporting its executives to foreign corporations — or do our managers fail to meet the high standards demanded by companies abroad?

It could, of course, be that Britain is so wonderful as a place to live and work that no directors ever want to leave, while foreign executives are waiting at Calais to escape their homeland by hiding in lorries heading for the home counties. Or perhaps not. A better excuse might be that British companies have long been ahead of the game in international expansion and thus often recruit chiefs from their own overseas divisions or set out to recruit new leaders who understand the global picture. But that is almost as arrogant an argument because, while Britain punches above its weight by accommodating a quarter of Europe’s top 100 companies, the other three quarters are not recruiting Britons as bosses.

Detailed analysis of these immigrant executives provides a better explanation: London has long been a capital of the world mining industry despite its lack of mines, so it is understandable if the top directors come from mineral-rich nations. Anglo American’s chief executive is American rather than Anglo, as is Rio Tinto’s; BHP Billiton, Randgold, Xstrata and Lonmin are run by South Africans. From there it is only a small step to the companies for which London is merely a place to list their shares — cruise line Carnival has a US captain, Antofagasta’s chief is Chilean, Vedanta’s is Indian, Eurasian Natural Resources’s is Ukrainian and Kazakhmys’s comes from Kazakhstan. And since credit company Experian was spun off from GUS it has moved its registered office to Jersey, its head office to Dublin and its accounting into dollars; its FTSE position is now its only UK connection, so why complain if it has a US chief executive?

But if some companies are only nominally British, there are plenty of solid UK firms that have chosen foreign chiefs. There was a US boss at Cadbury before the Americans at Kraft bid for it this week, and at AstraZeneca, Smith & Nephew, Burberry and Lloyds banking group. The dozen Americans are the biggest contingent of alien FTSE chiefs, but South Africa has sent us six and Australia three.

So possibly this is a language thing, and that might also explain why tongue-tied Brits fail to find top jobs on the Continent. But, without being xenophobic, perhaps foreign firms are less willing to welcome leaders from beyond their borders, just as overseas bids for UK companies are often easier than British takeovers abroad. England, after all, is so unprejudiced it recruits foreigners to manage its football team. If the BNP wants to win the City vote, campaigning to keep boardrooms British may do it.

But middle managers must wonder whether there is much point climbing the corporate ladder when there is a 41 per cent chance that nomination committees will look abroad to fill the top job. That may explain why so many British directors prefer working in the private equity sector, ‘going plural’ or simply claiming their pensions, to running public companies. But it may also be that those committees think British management doesn’t cut the mustard like their overseas rivals with MBAs from Insead or Wharton.

Or maybe the committees and their headhunters are just so desperate for something special that they confuse exceptional with exotic. Some companies are so enthralled with foreign bosses that they choose them every time. The London Stock Exchange has swapped a Dutch-Canadian for a Frenchman; Vodafone has replaced an Indian-born American with an Italian; British Airways tried an Australian before choosing an Irishman; and after three Swedes, the Rexam packaging group now has a chief from France.

Yet instances of foreign firms choosing British businessmen remain few and far between. Sir Win Bischoff briefly headed Citigroup in the US before riding to Lloyds’ rescue. After just a year as chief executive of Nippon Sheet Glass, Stuart Chambers returned from Japan this summer.

So before City slickers spout that high UK taxes or low bonuses will make them emigrate, they should check their chances of succeeding in a world where Brits seem to be unwanted. And when fat-cat water company chiefs or council heads say they need big pay packets to stop them going abroad, we should invite them to try their luck in an overseas job interview. Precedent says their prospects are pretty slim.