Carlos Ghosn should be the very model of the modern major corporate leader in a globalized world bestraddled by multinational companies. He was born in Brazil to Lebanese parents, educated in France, and speaks four languages fluently. He is chief executive officer of both French automaker Renault and its alliance partner Nissan, the Japanese car company. But the globe-trotting Ghosn is a rarity. Regardless of how international big business has become, most of the world's multinationals are led by men and women native to the country they're headquartered in. Transnational executives like Ghosn, 55, may well be the wave of the future, but it's a future that's still a long way off. That's because corporate leadership styles vary greatly from region to region and country to country.

"There is a huge variety of styles, partly produced by historical, cultural, and regulatory differences," says Simon Collinson, professor of international business and innovation at Britain's Warwick Business School. And more often than not, trying to make those diffuse styles of leadership work in foreign lands is an exercise in frustration. Regardless of how far-flung their markets and operations, multinationals retain and reflect the cultural mores of their home countries. "They are very much shaped by national culture," explains D. Quinn Mills, a professor emeritus of business administration at Harvard Business School. "That's why it's very hard to lead an organization that's of a different national culture."

If you think of global business styles as a continuum, U.S. executives are at one end, their Asian counterparts at the other. American executives, and the companies they lead, are generally more comfortable with risk and uncertainty than those in Europe and, particularly, Asia. That's partly an outgrowth of the individualism and entrepreneurialism so ingrained in U.S. society. Style and culture clashes are a big reason why cross-border mergers often end in tears, like the ill-starred hookup between Germany's Daimler and Detroit's Chrysler.

It's also why there is no global market for CEOs, says Craig Crossland, an assistant professor of management at the University of Texas-Austin. Only a few outsider CEOs are leading multinationals. Besides Ghosn, two of the best known are Howard Stringer, a naturalized U.S. citizen who was born in Wales and runs Japan's Sony, and Indian-born Indra Nooyi, chief of PepsiCo. Crossland researched the Fortune Global 500 companies, and of the 140 American companies listed, only 17 were headed by CEOs not born in the United States. So, what is the American style of corporate leadership, and how is it at variance with those of Asia and Europe?

Actually, there are a number of styles within the United States, but here's what is common to all American CEOs, according to Crossland: "They have more discretion to stamp their idiosyncratic style on a firm, for good or bad. They have more latitude to make large, strategic decisions themselves" on matters ranging from hiring, firing, and restructuring to expanding markets and stopping or starting product lines. Adds Jaideep Prabhu, an expert on Indian business at the University of Cambridge: "The U.S. style is more presidential. It's a 'the buck stops here' attitude." If things go badly at an American company, it's the CEO who gets blamed. If the company shines, he or she gets the credit.

In Asia, you would be hard-pressed to pin a decision--bad or good--on any one CEO. Decision making is consensus-driven and collaborative. Decisions are made only after much consultation and only after everyone has signed on. Even though Stringer has imposed some Western-style management practices on Sony, he still looks for consensus before taking major actions. That style is a reflection not only of the risk aversion that's inherent in many Asian cultures but also of the "collectivism" that's valued in them, says Donald Hambrick, professor of management at Pennsylvania State University. "Culturally, it is hard to make big, bold decisions if you don't have everyone on board." Teamwork also is a highly prized leadership trait in Europe. Still, while American executives have more leeway to be über-deciders, U.S. corporations are less hierarchical than those in the East. A CEO in Asia may need consensus to operate, but there's no doubting that he or she is the top dog.

The American system is also meritocratic and performance based. Pay, bonuses, and promotions are tied to doing a task well. That's not always the case at large companies in Asia. That's because they are often family run and reliant upon complex family and social relationships. "That's why mergers and acquisitions are less common there," Collinson says. It can also result in less-than-deserving people being rewarded. At some Indian companies, Prabhu says, "people were promoted just by being around for a long time." America's meritocracy is, however, a double-edged sword for U.S. execs. Sure, they can earn jaw-dropping pay packages if they succeed, but they'll probably get the boot if they fail. An American CEO is twice as likely to get bounced because of bottom-line losses as a CEO in Japan, according to Crossland.

American executives' operating methods also are shaped by the capital markets, which are obsessed with short-term gains. "One trademark of the American style is a focus on achieving results, short-term and long-term," says Neal Hartman, a managerial communications expert at MIT's Sloan School of Management. That also means decisions are made at a fairly torrid pace--something that isn't the case in Asia. The consultative, collaborative road to decision making can be slow and plodding. Asian companies, Harvard's Mills says, "are not as sophisticated as Americans in dealing with equity and bond markets. And a lot are wondering if they want to be" since the credit-crunch-induced recession. Instead, even multinationals in Asia rely more heavily on raising money from families, social networks, and governments. That's another big reason most American or European execs would be lost trying to run an Asian company: Their lack of connections would put them at a distinct disadvantage.

Mills says American CEOs excel at three things, starting with controlling costs. "In Europe," he says, "they're nowhere near as good at it"--in part because culture and politics make it harder to lay off workers. Americans also are good at combining and recombining assets to give the impression of creating value. "They're constantly buying and selling divisions, which is why private equity exists" and why top executives are so in the thrall of Wall Street. "This is really the American style of management. You build by acquisition; organic growth is much less common." Finally, Mills says, "they're very good at paying themselves. European and Asian executives spend more time building their business and less time paying themselves." And since U.S. executive compensation often is paid in stock options, well, that also explains why CEOs are sensitive to the capital markets' demand for results.

American phenomenon. Also striding the U.S. corporate landscape are celebrity CEOs, as well known to readers of Us magazine as they are to readers of Fortune. From Lee Iacocca and Jack Welch, to Bill Gates and Steve Jobs, to Warren Buffett and Donald Trump, America's boardrooms have churned out a galaxy of corporate superstars. "The celebrity CEO," Prabhu says, "is a particularly American phenomenon." Britain has, of course, produced Richard Branson, the Virgin honcho whose celebrity is truly global in stature, but few others. And examples are even scarcer on the Continent or in Asia. Many of America's most ballyhooed CEOs began as self-made men and women, and entrepreneurialism is a trait that's particularly treasured in the United States. "To be honest," says Warwick's Collinson, "as a culture, we're not into that." Mills, however, predicts that corporate superstars may soon emerge in Asia. "They are extremely brand-conscious and very media-conscious in Asia," and when it comes to celebrity CEOs, "they are the brand."

How likely is it that the world's varying executive styles will converge? "It's too early to tell," says Penn State's Hambrick. So far, he says, the evidence for convergence is thin. Leadership, of course, isn't management. Leadership, Mills says, is having a vision for the future and an ability to motivate subordinates; management is the methods used in pursuing that vision in a way that's profitable. Because companies worldwide use homogenous technologies and similar accounting practices and business schools all teach the same practices, Mills says, management techniques are converging toward the Western model. But at the leadership level, he argues, there is a shift away from emulating American leaders, especially since the financial crisis. His colleague at Harvard, business administration professor Linda A. Hill, agrees: "I don't think the American style of leadership is the one that will be adopted by all. And if it was, I don't think that would be a good thing."

That's not to say, however, that any one method reigns supreme. Arguably, the high-risk, more flexible styles of American CEOs are more suited to "disruptive" industries, like fashion, high technology, and entertainment, while the careful, consensus-driven styles of Asian execs are more at home in mature, slow-growth industries. But other than that, Hambrick says, "there's no best way to run a company. It's all a matter of it being a cultural fit." In other words, when it comes to corporate leadership: Vive la différence!

 

Free Markets, Free Muslims
Jon B. Alterman

Vali Nasr's new book, Forces of Fortune, was written largely in the exuberant phase of Dubai's story, but it is being published in a more sober time. It reflects some of the old enthusiasm for the notion that 'the Dubai model' -- a multiethnic, capitalist society insulated from violence and ideology -- could save the Middle East from a downward spiral of intolerance and political extremism.

 

(c) 2009 U.S. News & World Report

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