Multiple directorships: How many is enough?

DIRECTORS with multiple corporate directorships have often attracted the attention of corporate governance watchdogs.

The concern lies with the time fragmentation that occurs when a director also serves on the boards of other companies. A director of too many companies is likely to be an ineffective monitor of corporate management because he or she would be too busy to allocate sufficient time to govern any one company.

The time commitment needed is now even greater with the increasing responsibilities of corporate boards. The negative impact of time fragmentation is further reinforced by cases of companies with busy boards experiencing lower performance, retaining their CEOs despite poor performance, and furthermore excessively compensating these CEOs.