A recent editorial in Business Day raised a perennial governance hot potato: just how many boards should a single individual be able to serve on? The tenor of the article was that the current chair of Capitec should focus on that role, and risked being distracted by chairing two other boards as well.
“The view that the more complex and large an institution is, the more time the chair or board member should have to devote to it has some merit,” says Parmi Natesan, CEO, the Institute of Directors in South Africa. “For example, the decision by the current chair of Eskom to resign as chair of a large bank to concentrate on leading the power utility’s board was probably a wise move.
“However, because organisations are of varying sizes and degrees of complexity, and individuals have different capacities, the IoDSA does not believe it makes sense to attempt to create a hard-and-fast rule about how many boards an individual should be able to chair or, indeed, sit on.”
She argues that it remains up to each organisation to determine how much time each board member’s role requires, and to ensure that current or prospective board members can commit to that.
The individual director’s ability, experience and capacity would also be factors to consider.
In addition, board chairs and directors (especially those serving on key board committees) need to have the flexibility to ramp up the time they devote to their work during periods of crisis. Individuals who are fully committed will not have that flexibility.
In view of the growing realisation that governance plays a crucial role in ensuring corporate sustainability, investors are starting to take note of how many boards non-executive directors serve on. In the United Kingdom and United States, institutional investors (often via proxy services) oppose the appointment of directors with more than five board seats. In India, by contrast, the legal limit of directorships is 20.
King IV addresses the problem by recommending transparency, advising independent non-executive directors to detail their other board commitments and to provide a written undertaking that they have enough time to discharge their board responsibilities.
“Given the importance of the director’s role, it might make sense for boards to formalise the minimum amount of time that each role requires. The overriding principle is that the issue needs to be thoroughly ventilated and minuted to ensure there is consensus about what the role demands, and whether each director can give the time needed,” she concludes. “The Nominations Committee also plays a key role in monitoring the attendance and involvement of board members, and should act swiftly where there are capacity concerns.”
