In May, a majority of Twitter shareholders decided Silver Lake chief executive Egon Durban, who has bet on companies like Alibaba and Airbnb, tossed out too many director titles for the job. daily and voted against his re-appointment.
It is a sign that “overwork”, as it is called in corporate governance, is a growing problem for companies. But how many board seats is too much? The answer depends on who you ask.
Even the mention of overboarding is offensive. One UK business leader I spoke with trembled at the use of the word, wondering if I was going to name and shame him as a serial director. Others are turning down board seat offers for fear of investor outrage, even if they believe they are qualified. The presidents are also turning down high-profile candidates to avoid investor battles.
The UK Corporate Governance Code stipulates that if you are the top executive of a company, you should only take up one FTSE 100 non-executive director position. For the chairman or non-executive director other executive, there is no limit, but the individual must “allocate enough time to the company to carry out his or her responsibilities”.
Investors and proxy voting advisors have taken a tougher line, adopting a points-based system to gauge whether an individual is over-committed. In the United States, Institutional Shareholder Services says it recommends a majority vote against or withhold votes from directors sitting on more than five public company boards; or CEOs of public companies sit on the boards of more than two public companies in addition to their own. In the UK it has a limit of five duties where the post of non-executive director counts as one duty, a non-executive chairman counts as two and the chief executive position counts as three.
Most directors say that the number limit is arbitrary. They don’t take into account an individual’s ability to manage time, the different requirements of each board, and the requirements of each director – for example, whether he or she is on a committee. Those who serve on many boards say their ability to share experience and expertise is often overlooked.
“There are millions of shades of gray here that are not recognized,” said Kit Bingham, head of UK governance at Heidrick & Struggles. “The need to have enough time to perform all of his duties is justified. But when you set the rules around this, that’s when it gets complicated. It requires a more detailed discussion. But proxy advisors can’t have a meaningful conversation with every director, so they look to a formulaic approach.”
Even critics of those who collect board seats believe the current mechanism is too narrow. The calculations tend to evaluate board positions at publicly listed companies rather than at private companies, charities or public organisations.
But the business world needs to embrace overboarding. At least because of the increasing workload and more frequent board meetings. The pandemic, war in Ukraine and the global energy crisis are just a few factors that destabilize corporations. The enhanced regulatory environment has also meant that the supervisory role of the board has increased, and companies need more support from their directors in navigating issues, such as shape corporate responses to political issues.
“When a company is in crisis, it can be daily calls and meetings,” says Patricia Lenkov, an expert on board recruitment.
While board positions can be lucrative, reputational risks also increase. A series of scandals in recent years — from Boeing to Theranos — have shed light on how a poorly performing board can lead to disaster for the company. Patrick Dunne, who advises boards globally, said: “The expectations and requirements of the role have increased even with perhaps less social credit.
So what’s next? There is no easy math about overloading. Ideally, there should be a more nuanced conversation about roles rather than strict boundaries. Tracking attendance and acceptance of new board seats – this requires a director to do more work – is also important.
As for Twitter, Durban offered to resign but was retained despite the shareholder vote. Just a few months later, Elon Musk disbanded the entire board after taking over the company. However, Durban will not find itself out of place. My silver lake profile page still lists 10 board roles outside the company.