How busy is too busy: Are your directors overloaded?
With the appointment of three new directors at today’s AGM, engineering firm Downer EDI now has a board that’s almost gender-balanced.
On its seven-member board, three directors are women (two were appointed today). This is impressive, especially when compared to Downer’s peers. In the ASX200, only 15.1% of directorships are filled by women, according to October figures from the Australian Institute of Company Directors.
While shareholders overwhelmingly welcomed the new appointments, there were questions raised about the other commitments of board nominee Eve Howell, who is a chair and CEO of EMR Resources and also sits on the board of Mermaid Marine.
A proxy for the Australian Shareholders’ Association, at the meeting representing retail shareholders, gave his balanced approval to the appointments.
“Shareholders do want to see directors on the board who have the time to give to Downer,” he said.
“The conundrum is that qualified directors are likely to be busy and in-demand. There’s some sort of balancing act we as shareholders have to make.”
It’s not just a balancing act for shareholders, but one for directors to navigate too.
Many senior businesspeople sit on the boards of several listed companies, and knowing when they’ve taken on too much can be tricky.
Julie Garland McLellan, who sits on several listed and not-for-profit company boards, says her emotional attachment to the companies she leads is a good indicator of whether she’s taken on too much.
“I find that I tend to wake up at 3am and think about my companies,” she says. “When you’re invested like that you notice things,” she says.
“But if they’re not uppermost in your thoughts from time to time, that tells you that you don’t really care. That’s probably a good time to get off the board and make way for someone who does.”
Being a good director is about far more than just attending meetings, Garland McLellan explains.
“It takes a lot of time to sit down and really go through in detail, and think about not just what’s in the board papers, but what is missing and what ought to be there. As a director you have to be more sceptical than an auditor. You always need to think of what’s missing. There’s a creative and commercial side to the role, as well as an oversight one. Sometimes you can contribute through flashes of genius, but often it just requires plenty of time to think about the issues.”
There’s no limit to the amount of background work directors can do, but it’s also important for them to leave some time set aside for when things go wrong.
“When things are good, having multiple boards isn’t an issue,” Garland McLellan says.
“But when something goes bad, suddenly as a director your workload can increase by several hundred percent. And if the economy goes bad and all your companies go bad at the same time, well, you can find yourself working 20-hour days.”
The Australian Shareholders’ Association’s corporate governance policy suggests non-executive directors take on no more than five roles with an “average” workload. It considers a chairmanship to be worth two other directorships, in terms of workload.
This recommendation comes from an ASA study that found a non-executive directorship takes 37 days per year on average to execute, which means five directorships equates to 185 days per year of work, allowing directors to have “spare capacity” in case a crisis situation emerges.
Directors get overloaded because the people who recruit board members want people with experience, while not being open to people who want to be on boards, Garland McLellan says. “It’s one of those board conundrums, that people like the Australian Institute of Company Directors are trying to break with their mentoring and education programs.
“I’ve found the not-for-profit sector to be a great training ground for board members. It’s a great introduction.
“And then, if enough people are trained and experienced enough to do these roles, hopefully we won’t have this issue in the first place.”
Myriam Robin
Myriam Robin is a journalist with LeadingCompany. You can follow her on Twitter at @myriamrobin
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