The duties and responsibilities of a corporate director have evolved greatly over the last decade. Directors are now responsible for overseeing the execution of a host of corporate initiatives, including gender diversity, pay equity, the alignment of executive pay and performance, and much more. Consequently, this means that each board that a director serves on requires a significant commitment with respect to time and contribution. As a result, institutional investors are voting against directors during annual elections at a higher rate to voice disapproval of governance practices, including those directors who serve on multiple boards.
This segment examined the median investor approval received so far in 2019 for multi-boarded Equilar 500 directors. Equilar 500 directors who serve on just one board outside of their own received an overwhelming median investor support of 99.0%. On the contrary, once that number of external boards reaches two, the level of support declines significantly to just 71.6%. Interestingly, the level of support for directors who serve on three external boards jumps to 93.8%—a 22.6 percentage point increase from directors who serve on just two external boards. However, a small number of just three directors in the Equilar 500 served on three external boards.
While definitive conclusions can not be drawn from this analysis, there is a trend in favor of decreased support for multi-boarded directors. Institutional investors such as BlackRock and Vanguard have already adopted stronger policies against overboarding within the last year, and that is only likely to continue. As 2020 approaches, the level of scrutiny for these directors will most likely increase. Time will tell whether these trends will reflect in an overall decrease in the prevalence of overboarded directors.