EDITORIAL: WHAT IS THE RIGHT NUMBER OF NON-EXEC ROLES?

How many non-executive roles can a single person hold at any one time? Ensuring that directors have enough time and attention to devote to their role is critical. Investors and proxy advisors have really begun to focus in on ‘overboarding’ as a significant concern for director performance.

As far as regulation is concerned the UK Corporate Governance Code does not specify a set number of directorships other than saying that non-executive directors should have sufficient time to meet their board responsibilities.

Directors who serve on too many boards, and especially those who have active executive careers at the same time, might not have the bandwidth required to enable them to carry out all their roles effectively.

According to PwC’s 2022 Annual Corporate Directors Survey of over 700 directors, most commonly agreed that, when it came to non-executive directors, three boards should be the upper limit (48%), 31% thought up to four boards was appropriate, and only 9% thought it was acceptable for directors to serve on five or more boards.

The problem is that it is very difficult to be specific about the number of roles which is appropriate. There are so many variables. If someone has a portfolio of non-exec roles and no full-time executive role, they will have more time and capacity. But if even one of those roles has a major event such as undergoing a search for a new CEO or going through an acquisition or having to deal with an activist investor for example, that can demand significant additional time which will impact on their other roles.

And it should be remembered that, as Patrick Dunne said in a recent FT Article, ‘The expectations and demands of the role have increased even as the social credit is probably less’.

At the end of the day the only person who really knows how many non-executive roles they can carry out effectively is themselves. But when considering taking on a new role, it is really worth thinking through very carefully whether or not you have the bandwidth to contribute effectively to the new role as well as to your other roles. Because after all, it is your reputation that will suffer if you don’t.