
IN-DEPTH: How do investors and proxy advisors approach director overcommitment?

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Director overcommitment has become a key engagement topic with investors and proxy advisors focusing on the issue as board members are seen to face increasing demands on their time amid evolving risks around new technology, security and changing market conditions.
According to Diligent Market Intelligence (DMI) data, 556 votes were cast against directors at S&P 500 companies in the first 10 months of this year where time commitment concerns were flagged, with 51 such opposition votes targeting the FTSE 100.
Some 193 S&P 500 directors faced a vote against in the period over time commitments with 25 facing such pushback at FTSE 100 companies.
Based on the preferences of prominent investors, DMI defines a director that sits on five or more public boards as overboarded, with 11 serving directors at U.S.-based companies considered as such and four at U.K-headquartered companies.
Big Three
BlackRock and Vanguard have both indicated that at U.S-headquartered companies, they will support the election of a CEO who serves on no more than two boards, and a non-executive director who serves on no more than four boards, as part of their overboarding policies, with State Street following the same policy at non-S&P 500 companies.
In its 2024 Global Voting Spotlight reviewing the 2023-2024 proxy year, BlackRock revealed that it conveyed concerns about director overcommitment at 664 companies globally and that it did not support management recommendations on the election of 751 directors due to such concerns while cautioning that “an excessive number of roles could impair directors’ ability to fulfil all of their responsibilities, even more so when there are unforeseen events.”
In a case study, BlackRock pointed to its decision not to support the reelection of Roelof Botha at the 2024 annual meeting of U.S. software provider MongoDB, outlining that the director sat on the board of more than five companies. Botha secured just over 60.8% support at the meeting, according to the DMI Voting module, with the Florida State Board of Administration, Neuberger Berman Group and Wellington Management all citing director overcommitment in their rationale against.
Meanwhile, Vanguard stated in its 2024 U.S. regional brief that it “seeks to understand whether the number of directorship positions held by a director makes it challenging to dedicate the requisite time and attention to effectively fulfil their responsibilities at each company.”
It further outlined that it looks for companies to adopt a director commitment policy and disclosure of the board’s implementation of such a policy. The asset manager noted that it saw more U.S. companies implement director commitment policies during the 2024 proxy year, explaining that in several instances, such disclosures provided context which led it to lend support to directors who would otherwise have been considered overboarded.
While State Street does not prescribe a limit on the number of boards a director may serve on, it outlined in its Stewardship Activity Report that it will consider whether a company has publicly disclosed a director commitment policy. The asset manager stated that it would vote against the chair of the nominating committee at companies in the S&P 500 that do not have a director commitment policy publicly available.
Proxy advisors
Director over-commitment is also a key focus area for proxy voting advisors, with Institutional Shareholder Services’ (ISS) voting policy outlining that it will recommend a vote against a CEO who sits on more than three boards, and a non-executive director who is enrolled on more than five boards.
In its voting policy, Glass Lewis stated that it would also recommend a vote against a director who sits on more than five boards, as well as against a CEO who sits on more than two.
Glass Lewis explained that “an overcommitted director can pose a material risk to a company’s shareholders, particularly during periods of crisis,” observing also that the time commitment associated with being a director has significantly increased over the past decade.
The proxy advisor also looks for companies to have a director commitment policy in place stating that 85% of companies within the Russell 1000 have implemented a commitment policy, with 70% limiting the number of outside boards a director can serve on.
Investors use their vote
During the first 10 months of the year, 14 investor groups cited director time commitment issues in their vote against a director at a company in the S&P 500, while 10 cited the issue in votes against directors at FTSE 100 companies.
Legal & General Investment Management (LGIM) was one of 14 investor groups to home in on the issue in 2024, voting against 141 directors at S&P 500 companies in the first 10 months of this year.
According to its North America corporate governance and responsible investment policy, LGIM states that although it is important for directors to seek outside board appointments to broaden their skills and knowledge, directors must be “mindful of the time commitment required to exercise their duties on multiple boards.” It further outlined that it would vote against a CEO who serves on more than two boards, and a director who serves on more than four boards.
Aviva Investors voted against 71 directors in the S&P 500 in the period due to time commitment concerns. In its 2024 global voting policy, it explained that it would not support the reelection of a director whose other roles may compromise their ability to fulfil their board duties, and those who have attended less than 75% of board meetings without providing a reasonable explanation.