At Egan Associates, we believe there is no hard and fast rule for how many Director roles one person can handle. The workload a Director can manage will depend on each individual, with some Directors able to shoulder work that many would consider excessive and still do an exemplary job. We also recognise the significant benefits that can accrue to an organisation that has Directors with wide or interrelated Board roles, significant reputations and extensive contact networks.
However, not all Directors are the same. Not every Director is on a particular Board to contribute the same amount or to devote the same amount of attention to all matters including committee obligations. Some will have health issues, others will have family preoccupations. Still others will be detail oriented and be unable to commit to a large number of Director appointments for risk of being swamped. Some roles will also be more demanding than others.
It might be time for a Director to rethink their portfolio if any of these indicators ring true:
- Whenever the Director contributes to a strategy discussion, their arguments run along the same, static lines, returning to ideas that have already been discarded. Worse, they continue to accept the prevailing wisdom about fundamental assumptions underpinning the organisation’s strategy. For example, they do not challenge assumptions about cost of capital, trends in consumer behaviour, effects of social media on reputation, shifts in the global competitive landscape, changes in government legislation or other crucial impacts on the business.
- They rarely, if ever, consider carefully constructed scenarios that outline potential futures for the organisation. In addition, they fail to prepare their thoughts on how the organisation might respond in any given scenario.
- The Director discovers a fact that they should have known about their company from a friend who is unconnected to the industry.
- They rely increasingly on what is written in the media to get a feel for what is going on in the industry. Relatively little of their information comes from customer insights, analyses of the competitive landscape, the experienced perspectives of external advisers or fellow Directors, or even site visits and employee views. They can’t remember the last time they had a “watercooler” type discussion with a real employee.
- They find it hard to keep up with management changes.
- Their mind is only focused on the company during the hours of reading briefing documents and attending meetings. Any other time is taken up with other responsibilities. They find that much of their working day is spent travelling to meetings.
- They find themselves increasingly procrastinating over reading preparatory material. Often they do not find the time until the day before a meeting, or even occasionally during the travel to the meeting, leaving little or no time for introspection or considering how best to challenge and inspire the CEO and Senior Management.
- Their passion for one role is so encompassing that they find they’re thinking about that role when they’re at another company’s meeting.
- They don’t feel confident that if there was an issue with the organisations’ finances, they would be able to defend them.
- They find it difficult to keep track of potential conflicts of interest within their portfolio.
- They feel a sense of dread whenever a company’s name is mentioned.
The Australian Council of Superannuation Investors reported in September that of the almost 900 people holding Non-Executive Directorships in the ASX 200 for the 2012 financial year, 707 held one ASX 200 role, 137 held two, 27 held three, six held four and one held five. The Council dubbed those Directors who had held more than one Board seat “professional” Directors, of which there were 170 in total. These directors, accounting for less than a fifth of the Director population, held over a quarter of the available roles. We note that many of these Directors would likely also have commitments outside of the ASX 200, for example serving on a government body, private entity and/or a not-for-profit organisation or registered charity.
Every professional must work within their own boundaries to ensure they provide each Directorship the attention and due diligence it deserves. It’s important for Directors to be aware of the warning signs that they’ve taken on one role too many. And while it is nice to believe that Directors will be able to self monitor, it’s incumbent on Boards as a whole to recognise and monitor this issue, so they can ensure that they constantly review their collective performance and contribution.