The chance of this is even greater for board members who are prime targets to satisfy diversity objectives—and it is often difficult for them to say no. Also, board fees have risen, but for those who depend on directorships to provide a large part of their income, there is still a strong financial incentive to accept extra board roles.

So, we see directors who are clearly struggling in their current roles to live up to the reasonable expectations of their board colleagues. Their contributions may be highly praised but often qualified with the comment “when they are there”. These qualifications go beyond the fact of a director’s physical attendance to observations about, for example, the (in)adequacy of their preparation and their (short) attention spans.

A recent article by Canadian governance commentator Scott Baldwin posed the useful question, How Many Boards Is Too Many? His short answer was that “it depends”. For directors considering an additional board role, Baldwin refers to general personal considerations, such as career stage and family situation, but highlights two specific considerations:

1. Time commitments
For most people with substantive governance roles, the time they are expected to spend on them continues to increase. This is partly because of the growing compliance load but also thanks to the growing appreciation of the importance of board effectiveness. Added to that is the need to deal at short notice—and with some intensity—to occasional crises or unusual events. As Baldwin notes, directors serving on multiple boards may find they’re squeezed for time to adequately prepare, or have scheduling conflicts that cause them to miss meetings.

2. Conflict of interest
Depending on the size of the director pool, the risk of having a conflict of interest may or may not be significant but should always be addressed when considering a new board role. A conflict of interest is determined by third-party perception and is not always within the control of a board candidate or the board itself. The risk is that a conflict may be perceived likely to distort decision-making and thus raise ethical issues and undermine credibility. The potential for conflict must be considered not only in terms of a potential director’s personal interests but those of any other organisation on whose board they might already sit.

‘Overboarding’

This term refers to directors who seem to sit on too many boards. Baldwin suggests the number of boards a director serves on is excessive if it could result in them being unable to adequately fulfil their duties.

Baldwin believes that director overboarding did not become an issue until the financial crisis of 2008 when—as investors, regulators and stakeholders tried to pinpoint the root causes of the crisis—fingers were pointed at board failure. A prime cause appeared to be the lack of time and attention directors had given to their board roles. From there, it was a short step to the idea that a limit should be placed on how many boards a director could serve on.

Baldwin goes on to argue that this concern has since intensified. He refers to:

• increasing director responsibilities, including regulatory requirements, expectations of stakeholder engagement, emerging challenges like cyber security, company culture, ESG, and diversity and inclusion. Expanded scope often results in extra meetings, additional committees, more preparation time and more need for director learning and development.
  
  
• investor concerns. While Baldwin observes that, for the most part, publicly traded organisations are driving the focus on director overboarding. Investor stewardship efforts have grown more sophisticated and intense as the proxy advisors, institutional investors and asset managers who serve the interests of shareholders apply more resources to monitoring governance risks and board quality issues. Baldwin notes that four or five directorships is typically slated as the threshold for overboarding. This is set even lower for board chairs, chief executives and audit committee members. The article lists references for some of these guidelines and requirements which can vary significantly from one jurisdiction to another.
  
  
• directors in demand. The need for directors with specific skillsets in short supply has created an overboarding situation in, for example, technology and media companies that need the insights and expertise of younger directors. As observed at the start of this review, the desire for greater diversity and equity in board composition has increased the demand for director candidates who have traditionally been under-represented in the boardroom.

Non-profits and private companies

These boards may require just as much time from directors as a public company board. This is especially true for start-up entities and in situations that require extra work, such as chief executive search or strategic planning. When directors serve as volunteers, we all know the direction in which trade-offs are made when diary pressures become a problem.

How can boards deal with overboarding?

Baldwin recommends that the starting point is to take a proactive stance on overboarding by creating a policy that establishes parameters for when a director seems to be taking on too much. This provides a reference point for regularly reviewing (say annually) each director’s outside commitments. Such a policy can extend to applying tighter limits for directors with greater responsibilities (e.g. board and committee chairs). It should also extend to a board’s willingness to allow its chief executive to take an external board role. The usual limit for a chief executive is one outside board and only with board approval.

Baldwin notes that, as an alternative to a formal policy, many boards choose to address the issue when interviewing candidates, asking pointed questions about each person’s availability.

The benefits of serving on multiple boards

Baldwin acknowledges advantages to serving on multiple boards, if directors have the time to do so properly. If confidentiality is respected and conflicts of interest avoided, the benefits of multiple board membership—to both individual directors and the boards they serve on—include:

• sharing effective governance practices
• applying industry and economic knowledge
• spotting trends that affect more than one board
• receiving education on specialised topics that can be applied to other boards
• being able to contribute a broader perspective to board discussions
• being exposed to different board dynamics and cultures.

Baldwin concludes by asking what the right number of boards is, then sidesteps it by saying the best person to answer the question is a director contemplating an additional appointment. He does, however, offer a range of questions to assist in the decision—a checklist worth studying.