What Is overboarding?

overboarding

Overboarding is when a director serves on too many corporate boards simultaneously. Generally, there is no specific number for how many boards a director can join. However, many investors might be concerned if an individual served on more than four or five boards concurrently.  

The demand for experienced directors with knowledge in different industries is increasing. As a result, sought-after directors often end up overboarded. 

Possible implications 

Sitting on multiple boards might prevent directors from allocating time and attention to each role. Here are the possible implications of overboarding: 

Diluted effectiveness 

A firm commitment is necessary to ensure a director’s effectiveness. When an individual sits on too many boards, their focus can be fragmented and they may be unable to carry out their duties to fruition. It weakens their efficacy in providing strategic guidance, oversight and leadership. 

Conflicts of interest 

Sitting on multiple boards means serving different values and missions. This can cause conflicts of interest, especially if the companies are competitors or their interests overlap. 

Restraints of time 

Overboarding leads to convoluted schedules and commitments, causing directors to struggle to uphold meeting attendance, participate in strategic discussions, engage with stakeholders and fulfil their corporate governance responsibilities. 

Limited resources 

A board member’s ability to contribute resources such as expertise, networks and attention is limited when they spread themselves too thinly across multiple boards. 

Managing overboarding 

Here are ways to curb the negative implications of overboarding: 

  • Set limits: Organisations should establish clear criteria and role expectations to allow directors to assess their responsibilities before committing. Companies should also limit the number of boards a director can sit on simultaneously. 
  • Board evaluation: Regular board evaluations can help companies assess the effectiveness, contributions and leadership of individual directors, identifying any signs of overboarding. 
  • Disclosure requirements: Implementing disclosure requirements obliges board members to disclose their affiliations with other organisations, past and present board memberships and financial relationships to identify potential conflicts of interest. 

Guidelines on overboarding 

The UK Corporate Governance Code (UKGC) sets the guidelines for director roles. It states that a full-time executive director must not serve in more than one FTSE 100 non-executive role. There is no limit for chairs and other non-executive directors. However, they must commit adequate time to fulfil their responsibilities. In the UK, the general notion is that a case-by-case analysis is necessary to decide how many boards a director can serve on simultaneously. 

In France, however, the French Code sets a maximum limit of four listed company directorships for an individual. 

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