The concept of “overboarded” or "overboarding", refers to a member of the board who sits on an excessive number of boards or have an excessive number of roles in different entities.
The members of the board are considered overboarded because the time commitment needed for each role is bringing a presumption that they cannot fulfill their duties.
How much time is needed for one board?
Starting from presumption that practice is to have 4 quarterly meetings / year and at least one shareholder general meeting, a diligent member of the board should allocate at least one day for the day when the board meeting takes place and a day for studying the meeting documentation. There are usually 3 audit committee meetings / year and at least 2 remuneration committee meetings / year. An experienced board has one strategy meeting per year to discuss and agree the direction of the Company for next 12 months. The result is 22 days per year (this is the equivalent of a month). What if such member of the Board has a full-time job (what role will be neglected more)?
How many board meetings are called for instance for a company that has more than 13 general shareholders meetings / year (this example is inspired from Romgaz (SNG) Romania situation for 2022)?
How many roles are too many?
Corporate governance experts say that two roles in boards is all some members of the Board can realistically handle, but that some talented, well-organized individuals might be able to manage four or even five boards effectively if that is their full-time career.
Proxy advisors have strict rules on overboarding and considers that more than 5 roles are excessive. In counting the roles a role as a CEO, or chair of a board has a different weighting and is numbered as 2 roles.
‘Cursed’ CVs
Some candidates are tempted to add in their CVs more roles than real ones with the hope that they have more chances and investors are not detectives to check them. Under Romanian Criminal Code this may be considered a false statement and it is a crime.
This is a trust problem: can you trust a candidate that wants to mislead from beginning? The reputation is so fragile: once that is lost, is lost forever.
‘Trust is not a matter of technique, tricks, or tools but of character.’ (Lolly Daskal)
What future brings?
Board responsibilities are increasing, and members of the board are expected to dedicate more time to their duties due to the increasing regulatory requirements, shareholder engagement, cyber-security risk, climate change, and disruptive events.
Investor approaches are growing ever more sophisticated, as they dedicate more resources, and they use experienced advisors to monitoring corporate governance risks. Overboarding becomes a critical issue, along with board diversity, director qualifications, and board refreshment.
More information and tools are available to investors, as internet is so easy to be used. All proxy advisors have strict recommendations related to overboarding and it is difficult for an institutional investor to explain a vote in favor for an overboarded candidate.
What can be learned?
There is no shortage of qualified, valuable, and experienced professionals to serve competently and with excellence on boards. There is no need to have overboarded members, associated with corporate governance and reputation risks.