Hospital boards beware — investors and governance experts are now cautioning organizations about "overboarding," or directors who sit on too many boards and are stretched too thin to effectively oversee a company, according to The Wall Street Journal.
The report cites data from the National Association of Corporate Directors that shows directors of public companies now spend 248 hours on average each year for each board they serve on. This is up from about 191 hours in 2005, according to the report.
As each position requires more time, companies are starting to put the kibosh on excessive numbers of board seats. For example, toy maker Hasbro has limited its directors to four seats maximum, including its own board, according to the report. Similarly, BlackRock, J.P. Morgan & Chase Co.'s investment arm and the California State Teachers' Retirement System will not re-elect directors with more than four seats, according to the report.
The move to limit directors' seats is on trend with many S&P 500 companies — according to a Wall Street Journal analysis, 27 percent of S&P 500 company directors held four or more spots in 2005, and this is now down to just 5 percent. The report also cites data from executive search firm Spencer Stuart that 77 percent of such companies limit directorships to some degree.
There are still a few holdouts who make many directorships work with long hours and strategic timing. For example, Former Deloitte Touche Tohmatsu CEO Edward Kangas has commitments with five boards and three audit committees, according to the report. It works because two of the companies have odd fiscal years, according to the report.
Mr. Kangas has served on Dallas-based Tenet Healthcare's board for more than a dozen years, and exceeds its four-seat maximum. However, Tenet exempts him because of the unconventional financial calendars and his perfect attendance record, according to the report.
However, even Mr. Kangas plans to leave his board membership with Intuit this week, according to the report.
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