Major institutional investors, governance advisers and corporate boards themselves reportedly are cracking down on so-called overboarding, in which company directors spread themselves too thin.
Overstretched directors lack time to adequately monitor management, these critics contend, The Wall Street Journal reported.
"There is no good reason for having an overboarded director,’’ Charles Elson, head of the Weinberg Center for Corporate Governance at University of Delaware, told WSJ.com.
Elson predicts institutional-investor pressure will soon make S&P 500 board members with at least five seats a relic of the past.
A new analysis of S&P 500 chief executives for The Wall Street Journal by Equilar, a research firm, "suggests that leaders with multiple outside corporate board seats and their employers make more money, but their shareholders see lower returns than those with one or zero outside directorships," the Journal explained.
“The directors that serve on many boards tend to be very strong directors,” Zach Oleksiuk, head of BlackRock’s Americas corporate governance and responsible investment team, told the Journal. “The issue is not necessarily their performance, but rather the time that it takes to serve.”
Many directors who serve multiple boards contend that they adequately manage their time and can handle their board responsibilities, the Journal explained.
Meanwhile, the composition of such boards, based on sex and race, also recently was highlighted in a new study.
Firms targeted by activists end up with more white men on their boards, often replacing women and minorities in the process, according to a study by proxy voting firm ISS.
The researchers looked at 380 board seats spread across 93 companies in the Standard & Poor’s 1500 Index targeted by activists between 2011 and 2015, Bloomberg reported.
A separate Bloomberg News analysis of the same period found that five of the biggest U.S. activist funds sought 174 board positions on Standard & Poor’s 500 companies in the same period but nominated women only seven times.
The ISS study -- which looked at directors nominated by dissidents and by the boards themselves in response to activism -- found that women made up 8.4 percent of this group, compared with 25 percent of new directors at all S&P 1500 companies in 2015. People of color accounted for fewer than 5 percent, compared with 13 percent of new S&P 1500 directors that year.
(Newsmax wires services contributed to this report).
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