Board Directors Who Do Too Much: Overcommitted And Under Available

Twitter is in the news yet again. This time the headlines are about Twitter board member Egon Durban. On May 27th, it was reported that Durban would not leave the Twitter board even though shareholders voted against his reelection.1

The issue with Durban is not his lack of qualifications or pedigree; he has both in spades. Rather it is because, in addition to Twitter, Durban currently sits on six other public company boards. For the uninitiated, board service is a significant undertaking with much responsibility. It is estimated that the time required for each board role is 250 hours per year.2 And that is when things are going well. When the proverbial Titanic hits an iceberg, this time commitment can jump significantly as it did at the start of Covid-19 when boards of directors were meeting almost daily.

Institutional investors like BlackRock and State Street pay close attention to the number of public company boards a director sits on and will vote against those deemed overboarded. Proxy Advisory firms such as ISS and Glass Lewis follow these details closely and make recommendations accordingly. The general rule of thumb is that if a director is a current public company CEO, they should sit on a maximum of two public company boards. If they are not currently a public company CEO or public company executive, the recommended maximum is 4 or 5 (different organizations have slightly different recommendations.)

So, it is no wonder that Egon Durban, who sits on seven public company boards, failed to receive shareholder support. But he is not the only one; BlackRock reported that from July 1, 2020, to June 30, 2021, it voted against 163 directors at 149 companies based on overboarding. 3

This is all well and good. Board directors must be at least sufficiently available to do their work correctly. Gone are the good old days when high profile board directors such as Vernon Jordan could sit on ten major public company boards at the same time while being a senior executive partner at law firm Akin, Gump, Strauss, Hauer & Feld.

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However, it is essential to note that most conversations about overboarding omit a key and significant variable that substantially affects availability to commit to board roles and is rarely considered in the debates and voting on such matters. This is simply the number of private company board roles a particular individual holds.

Private company boards are legitimate and consequential responsibilities with expectations of time spent and attention given. Sometimes, a private company board can require more time and energy than a public company. This is particularly true in the case of smaller start-up companies, where board members are often called upon to provide advice and counsel beyond the formal board meetings. In the private company board environment, expectations may be less predictable than in large, well-run public companies. CEOs of these often-smaller private companies may rely on the mentorship of their board members, thus requiring time above and beyond the planned board meetings. And on the other end of the spectrum, there are private companies such as Cargill and Mars, whose size and complexity rival that of the largest of the S&P500.

Let’s go back to Egon Durban, the Twitter board member with seven public company boards. Durban’s profile page on the SilverLake website shows that he sits on 12 boards. Yes, some of these are as a representative of the private equity firm he works for, but the responsibility is still there. As mentioned previously this is not an anomaly. The often hard-to-measure gray area of private company boards and even non-profits can represent sizable obligations. These responsibilities are usually not taken into account when determining whether someone is over-committed/overboarded. And they should be. Considering only public company boards does not recognize the entirety of a person’s director obligations. To be fair, shareholders, investors, and all stakeholders should look at the whole picture when determining the suitability and availability of a board member. This is truly a case when less can actually mean more!

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