Mandatory annual report Underboarding Statement required to measure, manage & end overboarding
WHEN are non-executive directors (NEDs) going to start allocating sufficient time to their responsibilities? It is a worryingly common practice that many NEDs don’t devote enough time to their roles to ensure good governance, let alone sufficient oversight to protect the interests of customers, shareholders and the public from boardroom excess or bailouts. The limited amount of time makes it difficult to really engage with the business to understand the key issues ,especially strategy and to spend adequate time not just at Board meetings but in meeting employees and investors .The consequences of this insufficient time leads to Board Ineffectiveness in directing and guiding companies. The evidence for this is the very large number of scandals, the latest being Carillion affecting most business sectors not just Banking
According to McKinsey, well performing boards require at least 25 days of engagement per annum, yet many NEDs apparently often only spend 10-12 days a year on their responsibilities. Effectively, based on actual days spent per annum, NEDs are both short-changing businesses but also doubling their effective rate of pay for a sub-standard contribution.
The elegant euphemism for this short-changing is ‘overboarding’. Aka many who sit on boards also hold senior management positions at other companies, while they often also sit on boards of multiple companies. Obviously, it is in the interest of responsible companies to restrict the number of boards that their directors can sit on, yet many companies don’t or only do so informally. I would propose that we need to terminologically define this problem correctly. At the level of the individual director, this is overboarding but, at the level of the business or wider organization, this is actually UNDERboarding.
To my mind, and to address this shocking state of affairs, when it comes to annual general meetings and executive remuneration, boards should be formally required to publish for shareholders and potential investors an Underboarding Statement. This statement should list the positions held by each individual director: provide an itemized, account of days worked per position held as well as the total days worked. Such a requirement would immediately provide both clarity and enable benchmarking for shareholders, investors, government and the public alike. We know that what gets measured gets managed.