Overboarding vs. underboarding – the risks?


In a fast-changing and disruptive business environment, the performance of Boards is under intense scrutiny from investors, regulators, employees and other stakeholders. It’s clear that the days of Board roles as comfortable sinecures are long gone: at Fidelio our Evaluation and Search assignments reflect this with a sharp focus on relevant skills and substantive contribution from all Board members.

Given the increasing demands on Boards, relevant experience, aptitude and personality are obviously important, but another factor is also being monitored ever more closely – commitment and time availability have rightly become key criteria for Board Members.

Board Profiles

This is relevant as distinct Board profiles are emerging, including:

  1. An experienced former executive in retirement, strongly interested in work life balance at this stage of the career
  2. A current executive in a major role holding one external Non-Executive role
  3. A portfolio Non-Executive Director with a number of Board roles.

Corporate governance codes and investor guidelines are building ever more prescriptive views of time commitment linked to the concept of “overboarding”. But there are advantages, disadvantages and risks associated with each of the above profiles. As we explore in this Overture, the picture is not black and white when it comes to “how many Board roles?”.


Overboarding: a clear risk

“Non-executive directors should have sufficient time to meet their board responsibilities. They should provide constructive challenge, strategic guidance, offer specialist advice and hold management to account.”

UK Corporate Governance Code

There has historically been a temptation for Non-Executive Directors to take on multiple Board roles, and clearly this can reach a point where it impacts their ability perform their duties. The extreme is reached in off-shore tax havens where local nominees hold directorships in very large numbers of companies.

Corporate governance codes do not generally prescribe the numbers of Non-Executive roles one person can fulfil, but the UK code recommends that senior executives should take on only one additional FTSE 100 Non-Executive Directorship.

What investors want to see

However, investors and investor advisory services are becoming more prescriptive. Legal and General Investment Management (LGIM), one of the largest UK investors has recently endorsed the recommendation of only one major non-executive role for senior executives. ISS and Glass Lewis offer specific numerical guidelines, for example, ISS recommends that portfolio Non-Executive Directors hold no more than four directorships of quoted companies.

Restrictions on Non-Executive roles held by those with demanding “day jobs” seem common sense to us, but the overboarding issue is not clear cut, including for portfolio Non-Executive Directors. The difference between “too many” and “just enough” will depend on the demands of the individual roles, other commitments undertaken such as charity boards, as well as on how much time the individual wants to commit to their Board career.  The final decision on whether or not an individual has sufficient time available – as well as the relevant skills – should in our view rest with the Chair.


But one Board role may not be enough…

The value of independent Non-Executive Directors in shaping strategy and driving businesses forward has become uncontroversial, yet the precise nature of the “independent” element is worthy of further scrutiny.

As Board roles become more demanding and time consuming, especially in sectors such as financial services, and with the impact of additional responsibilities such as sitting on and chairing Board committees, some Directors may choose to be involved with just one company. This brings clear benefits in terms of availability, but it may erode the quality of their contribution – as well as its independence.

“The danger for Board members is actually ‘underboarding’, rather than the misconception of ‘overboarding’: how can you keep up if you’re only on one Board?  People with only one Board will focus on past experience at the executive level, whereas Directors with a diverse portfolio make a much stronger contribution based on current situations.”

Jan Babiak: Audit Committee Chair at Walgreens Boots Alliance and Bank of Montreal, Board Member at Euromoney Institutional Investors

Chairing a major financial institution, for example, has become more or less a full time job. While the Chair should be independent on appointment, it is clearly difficult to retain this stance in its truest sense given the time commitment and involvement. Therefore the independence of other Board Members becomes all the more important.

There do not seem to us to be any easy answers to this issue, and the likelihood is that demands on Boards will increase in future.  As such it’s clear that Directors – particularly, but not only, Non-Executive Directors – need sufficient current cross-company and preferably cross-sector expertise in order to add value. However, gaining cross-sector expertise and building a complementary portfolio of roles is becoming an increasing challenge for executive but increasingly also for Non-Executive Directors.

Networks of peers performing similar governance roles across a range of companies of relevant scale and complexity can also be a valuable mechanism for committee Chairs who are looking to cross reference Boardroom challenges they are facing. As part of our ongoing commitment to building effective Boards, Fidelio designs and develops bespoke peer networks for Company Chairs and Committee Chairs enabling them to draw upon the experience of other Boards, even if they are not able to commit to a portfolio of roles themselves. This is particularly valuable for newly appointed Committee Chairs and Committee Chairs still in an executive role who are severely time constrained.


Performance is key

From our perspective at Fidelio, the issue of “Overboarding vs. Underboarding” is not black and white and the Chair should certainly have discretion to build a Board that both has commitment and availability, but that can also draw upon a broad range of governance experience, preferably cross-sector. It is this combination that will lead to good decision-making, oversight and strategic contribution with which the Board is tasked.

There are a number of mechanisms and approaches available to Chairs seeking to achieve this balance:

  • A robust search process that casts the net wide and also interrogates closely what the candidate brings to the Board and their ability to commit
  • A regular review and evaluation, including externally, of Board composition and effectiveness providing an objective assessment of Board performance, extending to that of individuals in terms of attendance and engagement, thorough preparation, and effective contribution to the discussion and work of the Board
  • Bespoke peer networks to enable the Chair and Committee Chair to access the cross- sector insight needed to improve their ability to think through knotty governance issues
  • And finally, personal development to enable the Chair to continue to hone her or his chairing skills, as recently explored in Fidelio’s Chair Masterclass

For more information on how Fidelio can assist your company with Board Composition, Search and Evaluation, contact Gillian Karran-Cumberlege.

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