Tuesday, September 26, 2017

Pressure for Directors to Sit on Fewer Boards

The Wall Street Journal's Sarah Krouse and Joann S. Lublin report today that several major institutional investors have been pressuring companies to reduce the number of directors that simultaneously sit on a number of other boards of directors.  The writers report that, "The number of directors on five or more corporate boards has declined in recent years."   Why the pressure?  Investors argue that these directors cannot possibly provide adequate attention to their monitoring and oversight duties at a company if they sit on many other boards at the same time.  That makes good sense to me.   In fact, a study by research firm Equilar "suggests that leaders with multiple outside corporate board seats and their employers make more money, but their shareholders see lower returns than those with one or zero outside directorships."   Still, more than 60 directors of firms on the S&P 500 serve on five or more boards of directors at this time.   That should change.  Shareholders and other constituents deserve directors who are not only highly capable, but also who have the proper amount of time to devote to understanding a firm and its industry and engaging in effective oversight and control.  

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