Board and Leadership

Don't Go Overboard! Are Your Directors Serving on Too Many Boards?

What number is the tipping point for serving on multiple boards? A number of high-profile individuals sitting on multiple boards are fuelling a simmering debate across the corporate world, with shareholders and watchdogs forming the view that the old limits are too generous given increasing board responsibilities and workloads.

A revised answer to the question is bubbling to the surface in the Americas courtesy of proxy advisors and institutional investor voting guidelines. Recommended limits on directorships have been in place for years, the purpose of which is to reflect the direct correlation between time-commitment and performance. Of course, most directors themselves will recognise there are constraints on their time, and there is a general consensus among institutional investors that where a director has committed himself or herself to service on a large number of boards, that they are unlikely to be able to commit sufficient focus to the company and to discharge their responsibilities effectively. It makes sense that if a directors’ time is spread too thinly he or she will struggle to perform properly on each of their boards. At the most basic level, how can directors possibly squeeze in those last minute or emergency board meetings and calls if their schedules are packed too tightly, or for that matter prepare properly for their regular meetings?

ISS now notes that, over the past decade “the average time commitment for board service has exploded”[1]. We observe that the number of hours a director commits to preparing for and attending meetings of course varies, but for each board they serve we might reasonably expect a director to easily average somewhere around 300 to 350 hours of work per year for complex public companies, depending on committee service. We might certainly expect regulated companies to be at the higher end given the intensity of regulatory change and expectations, including much closer oversight of the business and enterprise risk management, not to mention increasing shareholder engagement activities. The change over the past years is marked, with the National Association of Corporate Directors (NACD) annual survey revealing the average director time commitment has grown by 46 percent, from 190 hours in 2005 to 278 hours in 2014.

Accordingly, in the Americas, the ISS recommendation to vote against or withhold for individual directors who sit on more than six public company boards has been revised down by one. If a director is serving on more than five public company boards, ISS will note that in its analysis in 2016 and starting in February 2017, it will recommend against such directors. Glass Lewis also notes this same trend, and highlights that it shall “closely review director board commitments and may note as a concern instances of directors serving on more than five total boards, for directors who are not also executives, and more than two total boards for a director who serves as an executive of a public company”[2]. Voting recommendations for 2016 remain unchanged. In 2017 - consistent with ISS - Glass Lewis will, “generally recommend voting against a director who serves as an executive officer of any public company while serving on a total of more than two public company boards and any other director who serves on a total of more than five public company boards”[3].

Directors sitting on multiple public boards, chairs of nominating and governance committees, and corporate secretaries may wish to consider what this means for them, and if they can, to take advantage of any rotation opportunities coming up. Proactive engagement with shareholders to ensure that plans are understood and supported would also be beneficial, in the event that rotations to over-boarded directors will take time to implement.

For context and perhaps an insight in to where things may be heading look at an international comparison: the United Kingdom. The UK Corporate Governance Code[4] provides as a Main Principle that, “all directors should be able to allocate sufficient time to the company to discharge their responsibilities”[5], and in relation to executive directors there is an associated Code Provision suggesting this Main Principle can be complied with by ensuring that, “the board should not agree to a full time executive director taking on more than one non-executive directorship in a FTSE 100 company nor the chairmanship of such a company”[6].

Directors’ responsibilities are certainly not abating and while the financial draw to serve multiple boards remains, the stakes for directors are now much greater especially in the financial sector. Serious consideration should be given to how effectively directors can serve companies rather than being satisfied that directors can juggle multiple commitments easily; watchdogs and shareholder alike are certainly expecting quality over quantity.

A concluding few thoughts as we look beyond 2017: are these policy changes an incremental step towards even further reduced limits? It may not be unreasonable to argue that the time commitment expected of a FTSE 100 director ought to be on par with that of a large public corporate in the Americas, and that a justification for parity at the lower limit might exist. Further, as directors depart public company boards to satisfy these policy recommendations - leaving space for fresh talent - perhaps now is the prime opportunity to diversify board composition, and to do so with relative ease?

Blake Stephenson
Blake Stephenson -- After being called to the English Bar in 2007, Blake has held governance, risk and compliance roles and has had a particular focus in regulatory compliance and good governance in UK markets infrastructure. His experience in this regard is from SIX Swiss Exchange and the UK's Financial Services Authority (now Financial Conduct Authority), where he supervised the London Stock Exchange Group. Blake also spent time as an advocate towards the European political institutions while working at the Futures and Options Association (now FIA Europe). Since joining NASDAQ in 2013 and before joining the Directors Desk management team in 2015, Blake was the Associate General Counsel in London, ensuring regulatory and governance compliance for NASDAQ's London interests. In addition to being called to the Bar, Blake has a degree with honours from the University of Kent, Canterbury, a Graduate Diploma in Law and a CISI Diploma in Investment Compliance.


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[1] Americas Proxy Voting Guidelines Updates, 2016 Benchmark Policy Recommendations, ISS, Nov. 20, 2015, page 5 (see web-link).

[2] Proxy Paper Guidelines, an overview of the Glass Lewis approach to proxy advice, Glass Lewis, 2016 Proxy Season, Page 2 (see-web-link).

[3] Ibid.


[5] UK Corporate Governance Code, September 2014, Main Principle B.3

[6] Ibid., Code Provision B.3.3

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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