LESSONS FROM A GLOBAL PERSPECTIVE- JAVIER G. TERUEL

In an increasingly complex world, it has become "vital for corporations to understand their culture, and to truly differentiate themselves by being companies that always put the human being first," advises Javier Teruel, and essential to developing a successful culture, the former Colgate-Palmolive executive says, is recognizing the great value of diversity and inclusion.

joined the Starbucks Coffee Company's board of directors in 2005, two years before he would retire from the multinational consumer products company Colgate-Palmolive. He started his career with Colgate in 1971 in Mexico City in a marketing and sales position. He then moved through various global markets, including Europe and the United States and had wrapped up in 2007 when he was vice chairman. After he retired, Teruel, who also is chairman of Alta Growth Capital, a private equity firm, would serve on the boards of Pepsi Bottling Group, the Nielsen Company and JC Penney. Today, he limits this role to only Starbucks.

As a director, he has seen the relationship between boards and management evolve and that diversity and inclusiveness has increasingly proven beneficial to companies. To make this happen, he said each director should bring something unique and valuable to the board based on their own experiences, expertise, talents and personalities. For Hispanic directors "Sometimes it only is pure Latin American expertise and that is okay, he said, because many companies do a huge business in Latin America. Or it can be a deep understanding of the Hispanic consumer in the United States," he said, which "is very, very different than Latin American consumers." He affirmed there’s "no doubt" that he has provided perspectives to his boards that nobody else had. "Those include all the things I am. I can provide a perspective of Latin America and I also can provide a perspective of the Hispanic consumer in the U.S." said Teruel. "The companies that I served are global companies," he said, with significant business in Latin America.

In many ways, Teruel's background as a Mexican and a senior executive, exemplifies the diversity that many companies need now and will need in the future to remain viable.

Sixteen years ago, both Starbucks and Colgate Palmolive saw something in having Teruel on the former’s board that could benefit their companies. The Seattle-based coffee giant was looking for a board member with international and marketing experience and who had run significant businesses. Colgate viewed that a directorship would rather round their longtime employee as a senior executive.

Colgate encouraged Teruel to accept the appointment which came in 2005 from Howard Schultz, who was the chairman and chief executive officer of Starbucks.

For a director to be successful, Teruel said, two things must happen. "I always believed that being a director of a board is a huge honor and a huge responsibility." he said, "but it has to work both ways. You have to contribute significantly to that company and then the experience itself has to be of significant value to you."

There are several factors that Teruel brings to a board that he sees are paramount in making this relationship valuable. "You have to bring a global perspective but take into account local differences and love the differences that are important," the Starbucks director said. This includes how you speak about benefits to consumers around the world and an awareness of the possible need to adjust product formulas like Colgate has done with the taste of its toothpaste in some geographies. In addition, local delivery practices have to be recognized, Teruel said. "In Latin America small mom and pop stores are very significant," he noted, and "in Mexico we have 800,000 to 1 million of these ‘changarros,’ but this is not a phenomenon in the United States or Europe." Companies also need to take into account differences in purchasing power, he said which for Hispanics in the United States is significantly higher than, for example, in Mexico, Colombia, Brazil or Guatemala.

In addition to the increasing value of global expertise, Teruel during his 16 years on company boards, has seen the functioning between management and their boards progress significantly. "The interaction has become a lot more professional and a lot more participative, "he said, "and with my boards it has evolved into more of a full exchange of ideas versus being served a solution." The extent of this interaction depends a lot on personalities. "I have been very, very lucky to serve on boards where the CEOs have been very open to being participatory," Teruel said, but this is not the case with many companies where a stamp of approval is sought and there is less of a discussion.

One of the needs that Teruel sees as vital is that many more boards seek diversity, not only in inclusion, but also as far as backgrounds, experiences and culture, but also raw talent and personal values and most importantly a significant participation of women and the younger generation.

Those CEOs who embrace and tap into that diversity, he said, "have a stronger opportunity of succeeding and having their company succeed." To achieve this diversity, Teruel said, it depends in large part in how corporate governance committees and the CEOs drive this change.

"If you don't run processes where you ask your search firms to always bring you a fair representation of diverse talent, then you will not see a pool of diverse talent and will not see diversity in the board," he said.

While board members like himself need to speak up, they also should recognize there is only so much you can push in one direction and that in the end it is management and not the board that actually run the business, Teruel said. "There is a place for you to advise and to ask the right questions and there is a place for you to step back and let management do what they have to do, what they think is right to do," he said.

Teruel said he would start by having all the kinds of representations on the board, particularly African American, Hispanic and Asian members, and request loud and clear that they want to see what efforts are being made to bring diversity within the company and to make sure that there is a similar effort at the board level. "Every time we see a candidate for succession, even for CEO, we need to see a diverse slate of candidates and in any discussion about directors, the same."

Teruel, who is a graduate of the Universidad Iberoamericana (Mexico City) and has an ISMP diploma from Harvard Business School finds that being a CEO today is a huge challenge. CEOs must deal with so many things and the world is changing so quickly, he said. If companies do not address security and the digital transformation, for example, they could die. "We have become much more sensitive and aware of how the world can put us on our knees because of factors such as COVID-19," Teruel said, adding "I admire very much companies that went all the way and did everything they could to save their company, their customers and their jobs, like Starbucks did."

Moreover, Teruel said, "We have to be humane companies, much more connected to all our stakeholders – yes, directors in theory represent shareholders – but we have to represent all stakeholders and we have to do the right thing for our customers, for our employees, for our communities, for the environment, for the suppliers, for everyone that is a stakeholder in our company."

The boards are becoming a place where these things are discussed and where strategies are valued in a broader sense, he said.

"WE HAVE TO BE HUMANE COMPANIES, MUCH MORE CONNECTED TO ALL OUR STAKEHOLDERS – YES, DIRECTORS IN THEORY REPRESENT SHAREHOLDERS – BUT WE HAVE TO REPRESENT ALL STAKEHOLDERS AND WE HAVE TO DO THE RIGHT THING FOR OUR CUSTOMERS, FOR OUR EMPLOYEES, FOR OUR COMMUNITIES, FOR THE ENVIRONMENT, FOR THE SUPPLIERS, FOR EVERYONE THAT IS A STAKEHOLDER IN OUR COMPANY."