‘Overboarding’: the perils of sitting on too many boards

This is an audio transcript of the Working It podcast episode: ‘Overboarding’ — the perils of sitting on too many boards

Jonathan Black
These are serious jobs, especially if it’s a public company. You can’t any longer just turn up reading the papers in the train for the meeting. You’re gonna be required at, let’s say, six annual meetings plus subcommittees and a deck of papers to read and be ready to ask questions about it. You’ll probably also be asked to go and visit some of the organisation, talk to the staff. So it’s a serious commitment, probably one or two days a week.

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Isabel Berwick
Hello and welcome to Working It from the Financial Times with me, Isabel Berwick. Jonathan Black, the FT’s careers expert, was talking to me there about what landing a seat on a company board involves and how many board seats any one individual should have. So how many is too many for one person? It’s a question a lot of people in the business world are starting to ask. And it’s a problem that’s being referred to as “overboarding”, which is for a change, a jargon word that I really like. We’ll come back to Jonathan a bit later. But first, I spoke to Anjli Raval, the FT’s management editor, and I asked her to unpick what we mean by overboarding in the first place.

Anjli Raval
So overboarding is sort of industry jargon. I mean, if you speak to somebody who’s in the executive search world or the headhunting world, they use it quite a lot. But it’s only now if you speak to board directors, they’re only starting to use it. What you might have heard more is, “I’m a plural board director”. That’s something that’s viewed quite positively. Most board directors hate the word overboarding. But the one thing that sort of gets lost in this whole debate is that the workload is really increasing for a board director. And that’s one of the reasons why we should look at overboarding. I mean, look at the last three years between Covid. You look at what’s going on at the moment with just energy prices, inflation, or you look at the war in Ukraine. There’s so many factors that could potentially, you know, destabilise the company. All of these things do take time to kind of go through.

Isabel Berwick
Right. So it could be the case that if you’re on a number of boards, all of those companies could potentially be in crisis at the same time and you wouldn’t have any other time, would do, you’d be absolutely run off your feet.

Anjli Raval
That’s the thing. And most board directors say to me they always build in some wiggle room because if you are a good board director, you do need to make allowances for the fact that a company could be in crisis or multiple companies could be in crisis.

Isabel Berwick
Anjli, we’ve seen examples of investors voting against board members being appointed if they believe that director is overcommitted.

Anjli Raval
One of the most notable ones that investors came out against was Egon Durban, who is Silver Lake’s chief executive. And, you know, Silver is very famous for making bets on companies like Alibaba and Airbnb. But he had so many directorships on top of his day job and the majority of Twitter shareholders decided that he was one of these people that they didn’t sort of want on there. And there are lots of other examples, too. But what’s more interesting is that some of the criticism is happening behind closed doors and not in a public fashion. And so some of the board members I talked to, they’re extremely concerned about this because they hear among sort of their network that there’s some of their peers that are not taking on bigger jobs or taking on more prominent board roles because they worry about investors coming after them even if they believe they have the capacity.

Isabel Berwick
So it’s people who are fearful of sort of public shaming, essentially.

Anjli Raval
Yeah. And also, chairs are very wary, too. If you’ve got a battle on your hands around remuneration, do you really then want to fill a board seat with somebody who has six, seven, 10 roles in lots of different areas? Remember that at the moment investors are really only tracking their roles on publicly listed companies, either as an executive or non-executive director. But there are a whole load of other jobs they might be doing. You could be on the board of a charity. You could be on the board of a private company. At the moment the kind of counting that gets done, the arithmetic sort of doesn’t tend to include all these different roles, but it’s starting to happen.

Isabel Berwick
And what actual rules or codes of governance are there in the UK and the US, for example, about how many public boards you can sit on?

Anjli Raval
The rules do vary, but on the whole it’s around five seats or five points. The way you sort of calculate this is that if you are at the top levels of a company, you have less of an allowance to sit on boards elsewhere. There’s all sorts of sort of mental math that needs to be done because you could sit on the board of one company outside of your own where you’re an executive, but then you could have all sorts of other trustee roles or board seats at charities and things like that that are actually quite demanding. And if you’re doing the job well, it does take up huge amounts of time.

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Isabel Berwick
So how should directors and people who help directors get on to boards in the first place think about these issues? Well, board directors are by definition, experts in their areas, and they’re used to working on many projects at once. But how many boards are too many? It’s a question I asked Patricia Lenkov. She’s an expert in corporate governance and she’s founder and president of Agility Executive Search in New York. Patricia, in your experience, do non-executive or external directors have a tendency to want to take up too many board roles and overcommit themselves?

Patricia Lenkov
Well, you know, we all have a human tendency — well, some of us have a human tendency to have grand expectations about what we can do. And maybe sometimes we don’t understand the full implications of taking on a board role so some people take on too many. It’s a touchy subject.

Isabel Berwick
Clearly. And is, say, five board positions too many? Should the rules be tightened even further?

Patricia Lenkov
You know, it really depends on whether the person is, first of all, working or not working. Do they have a day job or not? So if they are in a day job, five is too many. If they’re just a non-executive director and I don’t mean just, but if they’re only doing board roles it depends on the company, it depends on the person, it depends on what else they’re doing. I think the point is, though, that it’s important to look at all board roles, not just public company board roles. So right now, when board roles are measured, we only look at public companies, but that’s only telling part of the picture because people sit on private company boards, they sit on advisory boards, they sit on not-for-profit boards.

Isabel Berwick
Right. So there’s a sort of tip of the iceberg, and then there’s quite a lot that we might not see generally.

Patricia Lenkov
Exactly. And, you know, all of this is responsibility and all of it takes time and energy and commitment. So it’s really important to look at the entire picture.

Isabel Berwick
And is the world and the demands on board members just becoming so complex that it’s impossible to do the job? I mean, was it easier in times past to be on multiple boards?

Patricia Lenkov
Yes! I love to talk about this because when I started recruiting board directors, which was about 25 years ago, it was really a much easier job. Many boards were kind of what we called ceremonial in nature. They were there kind of to say yes to everything. But as time went on, there were mega restrictions, mega regulations, compliance expectations. So the role has become increasingly complex, increasingly demanding and increasingly transparent. You know, what went on in the boardroom back in the good old days was really unknown when today, it’s very much the opposite. And we have activist investors who are banging at the door, asking the tough questions. So it’s really a much more complicated role than it ever was. And as a result, it takes more time and energy.

Isabel Berwick
And I know that institutional investors are starting to become more active and activist in terms of asking people not to be on too many boards. Do you think there are reasonable restrictions? Do you think that activists are gonna get more vociferous in terms of trying to stop people from being on too many boards?

Patricia Lenkov
Yes. Yes. I think right now, institutional investors, the BlackRocks of the world, for example, you know, they have requirements and they have suggestions about how many boards CEOs, non-execs can sit on. But I think what’s really important and what I’m trying to get more awareness of is that they only talk about public company boards. And again, that’s only the tip of the iceberg. So right now they’re saying, OK, public company CEOs can only sit on two boards and public company executives can only sit on two, but non-execs can sit on four. And then what you see is you have all these directors who are sitting on this number of public boards, but then they’re sitting on five, 10, sometimes more private company boards. I did a little research and for an example, I wanna give you a number here, is that in the US there’s almost 2,000 directors who sit on 10 or more boards. But when you take out the private companies and just look at public companies, you only have 21 people. So basically there’s all kinds of, you know, directors who are sitting on, again, 10 or more, but sitting on many, many private company boards. So I think, you know, no matter what the number is, I think it’s important to look at it holistically and include all boards.

Isabel Berwick
Have you seen any evidence that institutional investors are starting to do that?

Patricia Lenkov
No. (Isabel laughs) Basically, quite simply, no. And, you know, there’s a lot less IPOs. Every year we read the numbers and there’s fewer companies going public. So what that means is obviously more companies are choosing to stay private. And we’re not really looking at the obligations that those companies require of their directors.

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Isabel Berwick
So corporate governance expert Patricia Lenkov believes that looking at all the commitments a person has is the right way to deal with the issue of overboarding. I asked the FT’s Jonathan Black, who we heard from at the start of the show, what makes a good board director and what’s in it for someone from a career and personal development point of view.

Jonathan Black
I think the main advice, which actually features in a lot of my columns, is what’s the motivation? What are you trying to get out of this? Don’t just go on a board because you want the title. Are you trying to give back, earn more money or gain new skills? Because there are other ways to do it than go on to a board. I think we should also talk about the downsides of being on a board, which are huge responsibilities.

Isabel Berwick
Yes, I’ve wondered about that. So what kind of responsibilities do people take on or perhaps don’t realise they’re taking on?

Jonathan Black
They are the ultimate backstop of the operations of the organisation. I mean, we saw it a lot in 2008 with, say, Northern Rock where the board was in serious trouble because, you know, the operations and the managing director and the chief exec can claim one thing, but the board are there to make sure things are done properly and they’re the backstop for looking at the audit. If you look at being a school board governor, let’s say, again the governors, the board, the trustees are the ones responsible if something goes wrong. So you shouldn’t take on these responsibilities lightly. That’s not to say don’t do them, but there are some risks with it. The other downside, especially for people who’ve been used to an executive role, is knowing that there is a line that the board doesn’t cross. You cannot make the decisions about running the business. You’re going to give advice and guidance and hold people to account. But in the end, the chief exec is going to decide whether to follow your advice or not.

Isabel Berwick
So that brings me on to my next question, ’cause I was gonna say, what qualities do people need or what do you need to sort of develop in yourself to become a good board director? And you’ve touched there on being able to stand back perhaps, and not being interventionist.

Jonathan Black
Well, Murray Steele, the course director for the FT’s own non-exec diploma program, he had a great quote that I used in a column years ago about it’s not a job for the lucky gifted amateur. So you do need particular skills. And often, boards will run an audit and say we need people with, let’s say, real estate experience or HR or safeguarding or personnel or treasury functions. So they might look for very specific skills that you can bring, at which point you would probably then be asked to sit on one of the subcommittees. Maybe if you’re an accountant, it would be the audit subcommittee, or if you’re an HR professional, it would be the personnel committee. So you can bring your own technical skills. And then I think it’s the more general skills of being persuasive and a good team member and being able to gently challenge — the sort of critical friend to the business — to make sure that there’s someone in the room asking the difficult question, not just for the sake of it, but to make sure that the organisation has thought through all the options.

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Isabel Berwick
Jonathan, thank you so much.

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I have to admit, I hadn’t heard of overboarding before Anjli Raval wrote that article about it in the FT, which went, I wouldn’t say viral, but it was a huge hit because people are interested. When people take on too much, other people are starting to notice. And this analogy of the iceberg, you know, what we see about people’s board positions is just the tip of it and there’s lots going on underneath. They may be on loads of charitable or non-quoted boards and advisory committees. You know, how much is too much? I think we should all be asking ourselves that question and also widening the pool of people. You know, look beyond your network. Having said that, I was really inspired by what Jonathan was saying about the ways it can enhance your career and your personal development. And getting on a board or an advisory committee is a really good way to build your network, to learn how to get on with people, to make decisions. So I don’t want you to come away from this podcast with a negative attitude. You know, I’m much more positive having recorded this than I was at the beginning.

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Thanks to Jonathan Black, Patricia Lenkov and Anjli Raval for this episode. If you’re enjoying the podcast, we’d really appreciate it if you left us a rating and review on Apple Podcasts. And please do get in touch with us. We want to hear from you. We’re at workingit@ft.com or I’m Isabel Berwick on LinkedIn. If you’re an FT subscriber, please sign up for our Working It newsletter. We’ve got the best workplace and management stories from across the FT in one place every Wednesday. Sign up at ft.com/newsletters. This episode of Working It was produced by Manuela Saragosa and Audrey Tinline with mix from Breen Turner. Thanks for listening.

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