How Many Boards Is Too Many?
from
November/December 2002
by John R. Engen
How many boards does it take to screwin a light bulb? Oops, that should be: How many does it take to screw up your head? In other words, should there be a restriction on the number of boards one person can join?
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Should you limit the number of a
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Surveys Says
and 53.7%
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According to our survey, most directors agree that fewer is better. So do advocates of reform, who contend that many directors are spread too thin to do their job. “If you’re going to be a meaningful presence on a board, it’s very time-consuming,” says Irwin Helford, retired vice chairman of Office Depot, who is a director of four companies, including Svoboda Collins LLC. “That limits the number of directorships you should take on.”
Directors say they average 14 hours a month for each board—more time than a year ago for nearly half of them. This workload recently led to a recommendation by the National Association of Corporate Directors in Washington, D.C., that outside directors with full-time jobs sit on no more than four boards, and that retirees limit themselves to six.
“There are only so many hours in a day,” says Charles Elson, director of theUniversity of Delaware’s Center for Corporate Governance. “If you are on too many boards, you’re bound to give short shrift to somebody, because you can’t effectively exercise the diligence and oversight required.” Elson himself serves on four boards—and feels taxed in doing so.
Poll participants would restrict CEOs to two outside directorships (as wouldthe NACD). Proponents of this limit say the experience a CEO gains by sitting on other boards must be balanced against the time taken away from his or her primary responsibility.
Not everyone is ready to embrace the idea of cutting back. “If you want to spend half your time in Timbuktu and half your time in Hawaii or whatever, you’re not going to have an awful lot of time to serve on boards, and you shouldn’t be on many,” says Jerry E. Ryan, a director of Lone Star Technologies, Aaon, and Global Power Equipment Group. “But on the other hand, if you have time and you have vibrant interest, I think it’s difficult to set a number.” Adds William H. T. Bush, a director of Wellpoint Health Networks and four other outfits: “Limits would hurt the small companies. If you can only be on a few boards, people will choose the bigger ones. And the smaller companies are often the ones who really need the advice and counsel of good board members.”
Roger Raber, the NACD’s president and CEO, says it’s easy for directors tounderestimate how much time board service requires. That’s particularly so if an unanticipated issue arises. Boards at companies such as WorldCom and Qwest have worked overtime dealing with questionable accounting practices. Archibald Cox Jr., a director of HutchinsonTechnology, says it’s the commitment to a committee that can chew up your time, “so just looking at the number of boards doesn’t get at the entire issue.” An audit committee meeting, the most closely scrutinized assignment these days, takes more than three hours, according to 53.5% of survey participants who serve on one. With the additional work of screening documents off-site, the hours mount.
“The amount of preparation I used to have for board meetings was a couple ofhours, and now it’s at least a couple of days,” says Deborah A. Coleman, co-managing partner of SmartForest Ventures in Portland, Oregon, and an outside director of Applied Materials and Synopsys. “I often take pretty much the whole weekend before a meeting, and that doesn’t even include the time in between, when you’re reading press releases, articles, and so on.”
“I’ve seen people preoccupied with other things at board meetings, and that’sdisturbing,” says Charles F. Pollnow, chairman, president, and CEO of Brulin Corp., a chemicals-manufacturing firm based in Indianapolis.“They’ve got a crisis on some other board they’re serving on, and they have to excuse themselves to take calls to deal with it. That’s an important interruption. I know it happens in the real world, and you’ve got to make room for it. But if you’re on too many boards, it happens too frequently and you don’t serve well enough on any of them.”
Although the issue has been raised in Congress, no one expects the government to legislate board-seat limits. That leaves it to boards and directors to do some self-policing. Many boards must already approve any outside directorships their CEOs want to take on. And two of the boards on which Elson serves—Nuevo Energy Co., an oil-and-gas exploration andproduction company, and AutoZone, an auto-parts retailer—have adopted the NACD limits for outside directors as well as CEOs, and have published them in their proxies.
The final line of defense: directors themselves. “If you don’t have the time to provide good input and guidance,” says Helford, “you shouldn’t serve on a board.”
