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.