New Zealand: Corporate governance: trophy collectors – directors who are over-boarded

Last Updated: 6 December 2017
Article by Denis Mowbray

While reading the profile of a female director in a governance magazine, I drew two important and connected conclusions. Firstly, and most importantly, the profiled director was completely over-boarded. The second issue which is directly related to the first, is the number of boards this director sat on, effectively reducing the number of boards available to aspiring, and I imagine equally, if not more capable women.

The profiled director; let's call her Alice, currently holds 11 governance roles. Nine are business/corporate boards (three listed), one is a government appointment; one is a not for profit (NFP), Alice also Chair's three of the 11 boards.

Given the discourse on the need to increase opportunities for women directors, alongside the need to ensure sufficient positions are available for aspiring directors (male/female). The number of governance roles Alice has, highlights a serious issue for many boards; directors who are over-boarded and who are blocking access for new entrants.

Unrelated to this article, but of equal importance is the impact that over-boarded directors have on organisational performance. Frankly, given many boards' aversion to any form of analysis of individual director performance. Identifying the impact of over-boarded directors on organisational performance would be very difficult to determine.

Putting aside the impact on performance over-boarded directors may have. What would the average time commitment for Alice be, if she were to undertake the core duties for each governance role, she holds? To calculate this, I estimated the number of hours each of Alice's governance roles would require over a one-year period. While accepting the limitations of this method, it does provide a clear insight on the level of workload Alice has, and the problems this may cause.

The hourly requirements used are averages, some boards would need more and others less. That said, I believe the numbers below are not excessive and in some cases could be described as too light.

These hours do not take account of extra meetings, required for committee meetings or meetings required during a crisis, merger, takeover, etc. While these additional meetings are relevant, I chose not to add these in, as their inclusion may shift the focus from the nexus of this discussion – over-boarding by directors and its ramifications.

The time requirements for the three core functions of a director's role were:

  • Meetings: Seven meetings per annum, each taking six hours (including travel) = 42 hours per board, per annum
  • Preparation: preparation time for seven board meetings, six hours per board = 42 hours per board, per annum
  • Staying Current: researching and staying current with industry/sector trends, developments, etc. six hours per month per board = 72 hours, per board, per annum
  • Chairs Role: for each Chairs role an extra allowance of 12 hours per month = 144 hours per board, per annum.

Total hours as a director for each of the 11 board's = 1716 hours per annum.
Additional hours for Chairs Role = 3 boards *144hrs = 432hrs adding the three Chair's requirements to the director roles, requires Alice to allocate 2148 hours per annum to her governance portfolio.
It should be noted that no allocation of hours has been made for Alice to undertake ongoing self-learning, which in my view is, or should be, a critical element of every director's continuing development.

By way of support for this calculation method, a recent European Corporate Governance report identified that directors work on average 215 hours per board, the National Association of Corporate Directors suggested an annual average of 227.5 hours on board-related matters. The American Bar Association suggested an average slightly higher at 250 hours.

To accommodate the calculated hours (2148), Alice could work seven hours a day, seven days a week for 44 weeks of the year. Alternatively, if Alice had one day a week off, she would work 51 weeks per annum. Working a 40-hour week, Alice would need to work 54 weeks per annum. What if Alice were an employee, and we were charging out her time. Alice's standard chargeable hours per annum, after deductions for holidays, sickness, statutory holidays, etc., should be 1476 hours per annum. This is a staggering 672 hours or 17 working weeks (over 4 months) less than what Alice has to work.

Now, explain to me how Alice's work load is in any way, conducive to Alice or any director giving the required thought, time and energy to their role, let alone his or her life outside of work.

Clearly Alice is over-boarded, perhaps by as many as three to four governance roles. This highlights the second identified issue; how can we grow the pool of experienced women directors if we have an elite group of female directors; referred to in Norway as 'Golden Skirts' who hold many of the available roles.

Over-boarding is a serious issue and one that is not a popular topic of discussion at the board table. Why, because it means having a difficult conversation with directors who in some cases, clearly have too many governance roles. Of course, it may well be you who is over-boarded.

Chairman and directors need to have a conversation, one that includes the executive team, to discuss how over-boarded directors impact the performance of the board. If your board is brave enough to have that conversation, here are some suggested questions to start with;

  1. How many, is too many boards?
  2. What standard of performance do we want from our directors?
  3. How will we measure that?
  4. What process do we have to keep track of the number of boards our directors sit on?
  5. Is there a formal process of request that a director must use before considering or accepting another role?
  6. For a director to reach our desired level of performance, how much time should they have to devote to:
    1. meeting preparation;
    2. staying current on industry/sector trends, etc;
    3. committee work; and /li>
    4. self-guided learning.

Starting with those questions will at the least illicit some discussion and probably some interesting insights into your boards view of the commitment required to be a good director. It will also identify those directors who see this whole matter as a storm in a tea cup. However, that kind of attitude should raise a red flag. If directors do not see over-boarding as an issue, what else are they missing or ignoring, if it doesn't suit them?

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Denis Mowbray
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