In recent years "overboarding" has become an important issue for many UK companies and investors alike. Several large asset managers as well as proxy advisors, including Vanguard, BlackRock, and LGIM, have tightened their voting guidelines to apply stricter criteria beyond the UK Corporate Governance Code, and certain directors serving on multiple public company boards have faced significant opposition to their elections.
What is overboarding?
Overboarding refers to a director who is perceived to be sitting on an excessive number of boards which can result in an under-commitment of time and attention.
The idea that directors should not serve on too many boards has been a key consideration for investors for many years. The main concern for investors and companies focuses on the ability of directors to fulfill their responsibilities given the time commitment associated with each directorship; and as corporate governance and investment stewardship standards evolve, so does the definition of an overextended director.
UK Corporate Governance
The current guideline for director roles in UK listed companies is set in the UK Corporate Governance Code ("UKGC") which states that if you are a top executive at a company, you should only take on one FTSE 100 non-executive directorship. For chairs or other non-executive directors, there is no limit but the individual must "allocate sufficient time to the company to discharge their responsibilities".
Investor Approach
In recent years investors and proxy voting advisers have taken a harder approach to director overboarding. With recent media coverage and investor pressure (media coverage and investor pressure) we believe this trend will continue as boards continue to face uncertainty and increasingly complex risks.
Ahead of the 2023 AGM season, we have summarised director overboarding policies of key proxy advisory firms, asset managers and institutional investors in the chart below.
Director overboarding summary
The chart below summarises the director over-boarding policies of key proxy advisory firms, large institutional investors and asset managers for UK and European portfolio companies. We note that some policies are specifically UK and European focussed whereas others are global policies.
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