PublicOrgTheory

Observations on the relevance of corporate nationality from Matthew Yglesias via Tyler Cowen:

What I find interesting, however, is not so much how irrational it is to attribute nationality to a business enterprise but how much nationality really does seem to matter. For example, the oil business is an global business. And the six “supermajor” firms are all global firms. But the CEO of Royal Dutch/Shell is Dutch. The CEO of Total is French. The CEO of BP is British. And the CEOs of ConocoPhillips and ExxonMobil are Americans. It’s a bit hard to understand why a competitive international labor market would work out that way. And beyond CEO nationality, local norms seem to make a big difference. The CEO of Total earns way less money than the CEOs of the other supermajors and to a first approximation the reason is that he’s French, and French CEOs just don’t get paid very well. More broadly, European and Japanese executives earn less money than American executives, with British executives in the middle. I recall that one of the issues with the DaimlerChrysler merger was that the executive pay scales were totally out of whack.

Any number of explanations could account for that appearance, including organizational bias, organizational inertia, small sample size, local regulations in the country of incorporation, shareholder and board pressures, just plain history, and probably a bunch more.  One I’ll add to the mix for consideration, though:  incompetence.

What if the reason global CEOs often come from the company’s home country is that that’s just the way they’ve always done it?  That’s not precisely incompetence, mind you, but the inability to think beyond the tight parameters of history and culture in order to make strategically constructive choices might be.