Governance Lessons from Silicon Valley

The tech world is light years ahead in dealing with rapid global change, immigration issues, engineering education, and online business

by Jonathan Visbal

With its tradition of having a highly international workforce and its role as a pioneer in collaborating with India and China, Silicon Valley can rightly claim to have a special perspective on global issues. The intense competition among Silicon Valley companies forces them to be inventive and flexible in everything from governance to product development to partnering. As a result, the Valley is a laboratory for global management and board governance best practices.

In Spencer Stuart's work with Valley companies to find both board directors and senior executive leadership, we have identified four lessons that any business building new capabilities or working in multiple countries and cultures would do well to heed.

Lesson 1: Boards are for more than oversight. Companies in Silicon Valley are often called on to transform themselves or realign their businesses quickly to keep pace with changes in technology, and Valley CEOs expect board members to be able to counsel them about a market or sector in which the company has little or no experience. This stems from a long history of having venture capitalists sit on the boards of startups that have not yet gone public and of the VCs being deeply involved in running the businesses. Silicon Valley CEOs have learned to rely on directors for more than oversight. They are looking for day-to-day advice and for connections to markets into which their companies are moving.

While companies outside Silicon Valley also look for expert board members, the difference is the speed with which tech companies often have to adapt and how much they look to board members to assist in the process. There is no reason companies outside of Silicon Valley shouldn't be thinking about future direction when looking for new board members.

Lesson 2: Look for a multicultural perspective. Silicon Valley companies usually seek managers with prior multinational operating experience and at least one language besides English. What multicultural executives bring to companies is the same skill set needed in multicultural directors: strategic foresight into global and local markets, plus an understanding of trends in supply-chain management, outsourcing, and the state of technological development and acceptance outside the U.S. When executives and directors combine these insights, business opportunities are created.

There is a caveat when it comes to recruiting multicultural directors, however. Directors need to understand the regulatory standards under which U.S. companies operate, particularly the strictures of Sarbanes-Oxley. Many countries are not nearly as constrained by regulation, and foreign directors might not grasp that what is allowed in home markets is prohibited here. This makes the search for multinational directors more difficult, and it usually requires looking at senior executives of multinationals who have multimarket experience or for Valley entrepreneurs who were brought up overseas and have successfully built a U.S. business.

Lesson 3. Companies should address societal problems that affect the bottom line. One of the biggest competitive issues facing Silicon Valley executives is a lack of focus on American engineering education. Silicon Valley first addressed this by recruiting foreigners who studied engineering in the U.S. This thrust Valley executives and boards into the heart of immigration issues, leading at first to expansion in the Valley and eventually to a crisis.

In the 1980s and '90s, many foreign students got work permits or became citizens—thanks in no small part to efforts made by Valley executives for more enlightened immigration policies—and founded their own startups in Silicon Valley. However, after September 11 and the clampdown on H1-B visas, many talented foreign students have been forced to study elsewhere. Plus, many Indians and Chinese who emigrated to the U.S. and gained valuable expertise here are returning home because opportunities for wealth creation are now greater there than in the U.S.