Are your directors “overboarded”? What would proxy advisors say? Institutional Shareholder Services (ISS) once set six as the maximum number of boards a director can serve effectively; now five is the limit, according to the 2017 ISS Benchmark Policy Recommendations for the Americas. The Glass Lewis Policy Guidelines also set a five-board limit. And both organizations set even stricter limits for corporate officers—for ISS, the limit is two boards not including one’s own board; for Glass Lewis it is two boards period. The Council of Institutional Investors, which has a policy in line with Glass Lewis, adds that “Currently serving CEOs should not serve as a director of more than one other company, and then only if the CEO’s own company is in the top half of its peer group.”
When directors serve on too many boards, ISS and Glass Lewis recommend votes against them come annual proxy season. Many institutions heed these recommendations, although a recent Equilar blog points out that even when directors fail to get a majority vote, they generally remain on their boards, even at companies with majority voting policies. BlackRock, the world’s largest asset manager, cast votes against 168 overboarded directors during this year’s proxy season, reported a recent article on overboarding in The Wall Street Journal.
A recent Ticker report cited a study by Jeremy Kress of the University of Michigan showing that directors’ overcommitment can cause problems for public companies–especially large, complex financial institutions. All the more reason for companies to adopt policies prohibiting overboarding.