How many Boards are too many?

MMB ADMIN

04 Oct 2022

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Once a director establishes himself on one board, certainly looking at the work done and experience gained, other companies will also approach him to serve their boards. This is definitely an overwhelming sight for new directors aiming to serve multiple boards however, does that director know that how many boards should he consider? Is saying a yes to all the opportunities a good idea or a balanced decision keeping in view the capacity should be taken?

These are some important grounds that one must assess before saying a blind yes to the offers. Of course, the decision will depend upon the personal and professional considerations of directors. Yet, assessing the amount of time to be dedicated to each board and other such factors is must.

Section 165(1) of the Companies Act, 2013 states that a person can hold the office of director simultaneously in 20 companies. The number of 20 companies includes the office of alternate directorship. However, the maximum number of public companies in which a person can be a director simultaneously is 10. But still the question remains the same – how many boards are too many? And how many boards should a person actually consider?

Experts say that one of the important issues that time constraints cause is the inability for over boarded directors to squeeze in last-minute emergency board meetings. Any number of things could surface that would justify scheduling an emergency meeting, like enterprise risk management or increasing shareholder engagement activities etc. Overall, over boarding puts undue constraints on board directors' time. The result of directors spreading themselves too thin is that they can't give adequate time to the board or discharge their duties properly.

Let us understand the two most important factors that shall affect the decision of directors while choosing appropriate boards for themselves:

• Time Commitment: Research reveal that these days directors spend from 200 to 300 hours per year on each board they serve. The said figure includes regular board and committee meetings as well as its preparation time. In addition, the occasional need for special board or committee meetings to deal with crises or unusual events, and directors serving on multiple boards may find themselves squeezed for time to adequately prepare for meetings.

• Conflict of Interest: Conflict of interest at the board level can affect ethics by distorting decision making and undermining credibility. Directors bear a fiduciary duty of loyalty to their stakeholders. The duty requires directors and officers to avoid conflicts between the interests of the corporation and any opposing interests - not just the director’s personal interests, but also on the interests related to their other boards.

Therefore, considering the aforementioned while choosing your boards as per your capacity is the need of the hour. Experts say that that one board is all some directors can 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. For directors who are also employed at a full-time job, more than two boards would be very difficult to manage well. Here are a few questions that would help you take appropriate decision while selecting boards:

• How much time do you currently spend on your board work? Factor in board meetings, committee meetings, preparation time, and time spent researching or educating yourself. Are you able to consistently dedicate the required time?
• What are the peak times for your current board work, and do they conflict with the schedule of the board you are considering?
• Will you be able to meet your boards’ expectations at the time of crisis?
• Is becoming a director your priority or do you consider it as a side job?
• What other time commitments do you have? Factor in work as well as personal timings. Don’t forget time for yourself – activities, leisure, health and wellness. Do you find yourself sacrificing these commitments so you can complete your board work?
• Analyze conflicts of interest between your current board / job / employment etc. and the boards you are considering to join.

For more details connect with us on info@mentormyboard.com.