As public company board service has become increasingly imperative and time-consuming, proxy advisory firms and institutional investors have sharpened their focus on directors who serve on an excessive number of boards. Overboarding concerns have become a key driver for recommendations or votes against director elections in recent years. For example, in its latest investment stewardship report, BlackRock reported that it voted against 163 directors at 149 companies in the Americas on the basis of overboarding from July 1, 2020 to June 30, 2021.
Public companies must stay informed of the director overboarding policies of their key institutional investors and consider how they may impact director elections and whether the company's own overboarding limits should be revised in light of policies in place at key investors. The chart below summarizes the overboarding policies of proxy advisory firms Glass Lewis and Institutional Shareholder Services (ISS) as well as several large institutional investors.
Investor viewpoints around the maximum number of public company boards have converged toward a maximum of one outside board for the CEO (i.e., two boards total) (highlighted in yellow in the chart below, together with the comparable limit as applied to named executive officers, or NEOs) and four boards total for other directors (highlighted in green in the chart below). Glass Lewis policy is aligned with this with respect to the CEO but not to other directors. ISS policy permits two outside public company directorships for the CEO and five total boards for other directors. Notably, while the ISS 2019 Benchmark Policy Survey sought feedback on the appropriate number of directorships for non-executive directors and CEOs but did not change its policy in 2020 or 2021, the ISS 2020 and 2021 Benchmark Policy Surveys did not include such a question, indicating that ISS may not be looking to lower its limits for 2022.
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