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Governance Data, Analytics, and News from Institutional Shareholder Services

July 19, 2019


Meetings to Watch

Upcoming ISS Speaking Events

Interesting Meeting Calendar

News Roundup

ISS Updates & Links



Director Overboarding: Global Trends, Definitions, and Impact

In the 2019 proxy season, “overboarding” became a center-stage issue for many companies and investors. Several large asset managers, including Vanguard, BlackRock, and LGIM, enhanced their voting guidelines to apply stricter criteria, while some directors serving on multiple public company boards faced significant opposition to their elections. 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 significant time commitment associated with each directorship; and as corporate governance and investment stewardship standards evolve, so does the definition of an overextended director.

Three primary drivers contribute to the renewed interest in director overboarding:

  1. Board responsibilities are increasing, and directors are expected to dedicate more time to their duties. A wide variety of issues is driving the expanding mandate: increasing regulatory requirements, expectations for shareholder engagement, cybersecurity threats, disruptive technologies, climate change, human capital management, and company culture are only a few of the drivers.
  2. Investor stewardship efforts are growing ever more sophisticated and intensifying, as asset owners and asset managers dedicate more resources to monitoring corporate governance risks. As part of the increased emphasis on board quality, overboarding becomes a critical issue, along with board diversity, director qualifications, and board refreshment.
  3. More information and tools are available to investors, as disclosures on outside board mandates are better databased, and investors are able to apply complex criteria to overboarding policies that go beyond just the number of board mandates, but also take into account individual roles and responsibilities.

In the following paragraphs, we explore varying definitions of overboarding, and we review emerging trends in investor sentiment, as demonstrated by significant votes against directors who serve on more than four boards. Finally, we examine the link between overboarding and company performance, and we find evidence of underperformance among companies with overboarded directors or executives on their boards.

Definitions of Overboarding

There is not one standard definition of an overboarded director. And adding to the problem, very few definitions include boards other than those at public companies (including non-profits and private companies), leaving a sizeable blind spot in the search for overextended directors. For the purposes of this analysis, we will limit our scope to only public-company directorships.

Some corporate governance codes of national jurisdictions discuss the importance of directors having a manageable number of outside mandates (e.g., the UK Corporate Governance Code), and a few codes set specific limits on the maximum number of directorships. However, these norms and rules typically vary by jurisdiction. While local standards typically stipulate the maximum number of board mandates, some investors take a more sophisticated approach to the definitions of overboarding by considering different thresholds based on an individual’s role at the company and the board. Below, we outline some of the key criteria that determine overboarding guidelines.

  • Employment status. Directors who are fully employed are generally expected to serve on fewer boards than directors who do not have a full-time employment (often referred to as professional directors). Separate thresholds may apply for C-suite executives. These criteria are generally stricter for CEOs, who are expected to serve on no more than one or two boards in addition to the board of the company the manage.

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  • Board and committee responsibilities. The role of the board chair is associated with more responsibilities compared to a regular board member, so the chair of the board is expected to serve on fewer boards. In some markets, a chair role is considered equivalent to two directorships, and governance codes and investor policies set directorship thresholds for board chairs based on this logic. Similarly, some investors may establish separate limits for the lead director, the chair (and possibly members) of the audit committee, or any other significant role at the board.
  • Universal limits. Independent of criteria based on specific roles and responsibilities, investors, companies, and governance codes typically set general limits on the number of boards a director can serve. From an investor perspective, these limits may differ by market, given prevailing market practice, or the investor may wish to encourage a standard of best practice across all markets. In markets where multiple directorships are more common, such as India and Hong Kong, initial regulatory efforts to curb the number of mandates set the limit to six or seven directorships. In developed markets, investors tend to expect a maximum of four or five mandates, with four boards gaining traction as the new limit among many companies and investors.

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Changing Investor Expectations

Market norms and expectations regarding the maximum number of boards a director may serve are evolving. In the decade since the financial crisis, increased investor scrutiny on board performance appears to have led to a decrease on the number of directors who serve on many boards. In the U.S., the percentage of non-CEO directors who sit on five or more boards has decreased by half since 2008 from 3.2 percent to 1.6 percent.

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As more investors continue to adopt stricter policy criteria on overboarding, we expect the pressure towards over-extended directors to rise. Until recently, up to five or six directorships were considered acceptable by most investors. But over the last two years, we have seen investors shift towards a new standard of no more than four public boards. Over that period, we have observed an uptick in significant opposition against the election of directors who serve on more than four boards.

In the U.S., this trend is especially notable, as proxy advisory firms have established policies that are less strict than the emerging standard (both ISS and Glass Lewis currently set an overall limit of up to five total board memberships). Hence, as with many other corporate governance developments (e.g., board gender diversity and board renewal), investors lead the way through engagement and voting, thus dispelling myths about undue influence by third parties.

As we reported in our recent review of U.S. vote results, these new overboarding criteria seem to contribute to the highest levels of significant director election opposition at U.S. companies since 2011. The percentage of all Russell 3000 directors receiving support by less than 80 percent of votes cast increased from 2.9 percent in 2015 to 4.9 percent in 2019. However, overboarding is not the sole factor or even the primary factor for this increase in overall director opposition. The data shows that overboarding affects less than half of approximately 1 percent of director nominations. Other criteria that have recently gained momentum, such as board gender diversity and board oversight, appear to affect more companies and director nominations.

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We observe a similar trend of significant opposition among overboarded executives. More than 30 percent of nominations of outside CEOs who serve on three total boards received support by less than 80 percent of votes cast in 2019, compared to only 3 percent of such nominations that received significant opposition in 2016. The figure more than doubled in the past year. Currently, the level of opposition against CEOs serving on three boards approaches the level of opposition against CEOs who serve on four or more boards, suggesting the emergence of another new standard for overboarding.

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Overboarding and Company Performance

To test the potential impact of overboarding on company performance, we examined several scenarios of director overboarding and their correlation with company economic performance. As a measure of economic performance, we used ISS’ proprietary EVA methodology (which stands for “Economic Value Added”). The EVA measure of profitability applies a residual income methodology that accounts for the full cost of capital (including both the cost of fixed income and cost of equity), and which adjusts for potential accounting statement distortions (e.g., R&D, advertising and promotions, and restructuring charges are capitalized). We use two metrics of profitability based on this methodology: EVA Margin and EVA Momentum over a three-year period. EVA Margin equals EVA as a percent of sales, while EVA Momentum shows the three-year trend in percentage change in EVA using a linear regression analysis. Hence, EVA Margin shows the overall level of true economic profitability, while EVA Momentum shows the level of improvement in profitability.

For both measures, companies with overboarded directors performed worse compared to companies with no overboarded directors. For the purposes of this analysis, our definition of “overboarded director” considered non-CEO directors who serve on more than four public company boards and CEOs (on the board of the company they manage or on an outside board) who serve on more than two boards. The coverage universe is the Russell 3000.

Companies that had at least one overboarded director (in either of the two categories described above) for the past three consecutive years exhibited median EVA Margin and EVA Momentum levels at approximately half of companies with no overboarded directors in 2019. Companies whose CEOs served on more than two other boards had a negative three-year average EVA Margin and low EVA Momentum, while companies with two or more overboarded directors showed the worst performance in both metrics. While further analysis is required to determine the link between economic performance and overboarding, we do see evidence of correlation between overboarding and underperformance, which supports the emerging practices by investors and companies to establish firm criteria on the maximum number of boards where a director may serve simultaneously.

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Overboarding and Board Quality

In the era of ESG integration and investor stewardship, one cannot view the new trends in overboarding criteria in isolation. In the past decade, investors have increased their efforts to monitor and ensure their interests are represented by dynamic, competent, and accountable boards. Staleness, entrenchment, and lack of oversight were considered as key factors that may have led to major corporate scandals in the early 2000s and the financial crisis. Therefore, increased board accountability, board renewal, and board diversity serve as mechanisms to protect investor interests and counter past tendencies of complacence. The new emphasis on overboarding is part of this process of improving board quality, whereby the increased demands on boards and directors do not allow for excessive board mandates, which may have encouraged a rubber-stamp culture in the past. At the same time, by limiting the number of boards an individual can serve companies and investors encourage renewal, diversity, and inclusion, as new faces join the director ranks, including candidates with more diverse backgrounds. Our recent review of U.S. board diversity trends finds that we see a record number of women, minorities, and new directors on boards, which suggests that the recent trends around overboarding contribute to the broader changes in board composition.

A Growing Number of Companies are Proactive

A growing number of public companies appear to address overboarding, often by placing limitations on the number of outside boards that a CEO and directors may serve on, and even putting additional limits on audit committee members as well. According to a 2018 Spencer Stuart report, 64 percent of S&P 500 companies have adopted numerical board limits for their directors, while 77 percent of S&P 500 companies have established some limit on directors’ ability to accept other directorships. Among the companies that have adopted numerical limits, 94 percent have established the limit at a total of four boards or less.

A good example of such an adoption comes from Apple Inc.’s Governance Guidelines, which state:

"Serving on the Corporation’s Board requires significant time and attention. Directors are expected to spend the time needed and meet as often as necessary to discharge their responsibilities properly. A director who also serves as the CEO of the Corporation should not serve on more than two boards of other public companies in addition to the Corporation’s Board. Directors other than the CEO of the Corporation should not serve on more than four boards of other public companies in addition to the Corporation’s Board."

Over time, we expect more companies, including large-cap companies and eventually more smaller firms, to adopt similar measures to ensure that adequate time is available for directors to fulfill their director responsibilities.

-- Kosmas Papadopoulos, CFA, ISS Analytics

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Special Situations Research

Log into Governance Analytics and click on Special Situations Research to enable these links:


CIRCOR Defense of Crane Tender | Note | Published on July 15, 2019


Contentious Pipeline - June 2019 | Pipeline | Published on July 12, 2019


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Upcoming ISS Speaking Events

These are upcoming events where ISS staff will be speaking or in attendance. ISS does not necessarily endorse any of these groups.

August 14, Asheville, NC
The Christian Investment Forum Leadership Summit 2019
(Chris Miller, ISS Research)

September 5, New York
Columbia University - Center of Global Energy Policy - Women in Energy Panel
(Ariane de Vienne, ISS ESG)

September 9, Paris
Panel Hosted by AllianzGI at PRI in Person
(Maximilian Horster, ISS ESG)

September 11, Dortmund
Working Group of Church Investors Conference
(Julia Wissmeyer, ISS ESG)

September 12, Stockholm
Klimatkommunerna Event
(Reinhilde Weidacher, ISS ESG)

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Interesting Meeting Calendar

This supplemental list highlights upcoming meetings with notable ballot items; these may include companies with interesting or novel shareholder proposals, proxy contests, non-standard management proposals, and more. Appearance on this list does not denote any particular ISS vote recommendation.

Company Ticker Country Meeting Type Date
BTS Group Holdings Public Co. Ltd. BTS Thailand Annual 22-Jul-19
HDFC Life Insurance Co. Ltd. 540777 India Annual 23-Jul-19
Remy Cointreau SA RCO France Annual/Special 24-Jul-19
Brown-Forman Corporation BF.B USA Annual 25-Jul-19
Soitec SA SOI France Annual/Special 26-Jul-19
DLF Limited 532868 India Annual 30-Jul-19
Companhia Energetica de Minas Gerais SA CMIG4 Brazil Special 7-Aug-19

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News Roundup

After years of ‘glacial change,’ women now hold more than 1 in 4 corporate board seats

When Kathy Higgins Victor first joined the board of directors at Best Buy in 1999, she was the only woman in the room. The former Northwest Airlines human resources chief and now president of a leadership coaching firm remembers how she “would say something, and then there’d be silence” followed by approval of a male colleague’s comments. She recalls thinking “Excuse me, was my mic off?”

Then there was the time an executive presented unflattering data about how female customers experienced shopping at the electronics retailer — not being acknowledged, not being helped — and her fellow directors rejected it, saying “that could not possibly be true.” Victor, meanwhile, thought the data was "spot on.”

Twenty years later, Victor is no longer the lone woman in Best Buy’s boardroom — she’s also part of the majority. After new CEO Corie Barry was elected to Best Buy’s board at its June shareholder meeting, the retailer became one of six companies in the Standard & Poor’s 500-stock index where women make up the majority of board members.

The Washington Post | July 17, 2019

ESG funds hitting their stride with record-level inflows

Sustainable investing strategies have suddenly become the magic bullet for mutual funds and exchange-traded funds.

The latest data from Morningstar Inc. show funds that focus on environmental, social and governance issues attracted $8.9 billion worth of net inflows during the first six months of the year.

That compares to $5.5 billion for all of 2018 and represents a trend that isn't likely to slow anytime soon, according to Jon Hale, global head of sustainability research at Morningstar Research Services.

"The interest in sustainable investing continues to grow and there are more funds and products available," he said. "We're also getting to the point where the wave of new [funds] that started in 2014 have been hitting their three-year marks."

Investment News | July 12, 2019

US Congress rejects European-style ESG reporting standards

Investors who want to achieve greater global uniformity about how companies disclose their use of environmental, social and governance standards have suffered a setback after the US Congress rejected a move to introduce European-style reporting standards into America.

Republican members of the House financial services committee opposed proposed legislation this week that would require companies to report more ESG information, as well as specific disclosures for risks associated with climate change, to enable investors to keep tabs on their portfolios.

The legislation would require the US Securities and Exchange Commission to write ESG disclosure rules. To date, the agency has done little to advance climate change disclosures on its own, beyond a 2010 set of guidelines on how existing rules may apply to climate- or weather-related risks.

Financial Times | July 12, 2019

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ISS Updates & Links

Links in these sections are available to subscribers through our on-line platform. 

To access these documents, first log into Governance Analytics and then click on Governance Exchange (or Special Situations Research for those noted items) to enable these links:

2019 ISS Publications

An Overview of Vote Requirements at U.S. General Meetings (available on ISS website)

Dual-Class Shares: Governance Risk and Company Performance (available on ISS website)

Early Review of 2019 US Proxy Season Vote Results (available on ISS website)

2019 U.S. Board Diversity Trends (available on ISS website)

Seven Venial Sins of Executive Compensation (available on ISS website)

CEO Ownership, Corporate Governance, and Company Performance (available on ISS website)

Snapshot: Update on U.S. Director Pay (available on ISS website)

Realizable Pay: Insights into Performance Alignment (available on ISS website)

2019 U.S. Executive Compensation Trends (available on ICS website)

2019 Compensation Insights: An Interview with the ISS U.S. Compensation Team (available on ICS website)

Insights into Value Creation: Using EVA to Measure Performance (available on ICS website)

Corporate Governance in Emerging Markets (available on ISS website)

The Long View: The Role of Shareholder Proposals in Shaping US Corporate Governance (2000-2018) (available on ISS website)

The Long View: US Proxy Voting Trends on E&S Issues from 2000 to 2018 (available on ISS website)

The Corporate Governance World in 2019 (available on ISS website)

Top 10 Corporate Governance Topics to Watch in 2019 (available on ISS website)

2018 ISS Publications

California Dreamin': The Impact of the New Board Gender Diversity Law (available on ISS website)

Pay in the Bay: Compensation Practices at San Francisco Bay Area Technology Companies

2018 US Equity Compensation Plans Overview and Trends (available on ICS website)

Independent Board Leadership Matters: Evidence from Governance Practices (available on ISS website)

C-Suite Gender Diversity and Company Performance (available on ISS website)

Director Skills: Diversity of Thought and Experience in the Boardroom (available on ISS website)

2018 European Voting Results Report

Board Refreshment: Finding the Right Balance (available on ICS website)

Women in the C-Suite: The Next Frontier in Gender Diversity (available on ISS website)

A Preliminary Review of the 2018 US Proxy Season (available on ICS website)

Peer Selection and the Wisdom of the Crowd (available on ICS website)

European Shareholder Rights Directive II: An Overview (available on ISS website)

Global Governance: Board Independence Standards and Practices

An Early Look at the U.S. 2018 Proxy Season Trends (available on ISS website)

U.S. Board Study: Board Accountability Practices Review (available on ISS website)

U.S. Board Study: Board Diversity Review (available on ISS website)

An Early Look at the State of U.S. CEO Pay (available on ISS website)

An Overview of U.S. shareholder Proposal Filings (available on ISS website)

2030: An Odyssey to Thirty-Percent Board Diversity (available on ISS website)

Sexual Misconduct Risk: Five Steps for Effective Management (available on ISS website)

Building Company Watchlists for Proxy Season (available on ISS website)

U.S. Tax Reform: Changes to 162(m) and Implications for Investors (available on ISS website)

2019 Season Reviews

2019 South Korea Proxy Season Review

2019 Season Previews

2019 Japan Proxy Season Preview

2019 Taiwan Proxy Season Preview

2019 China Proxy Season Preview

2019 Singapore Proxy Season Preview

2019 Hong Kong Proxy Season Preview

2019 US Environmental and Social Issues Proxy Season Preview

2019 Canada Proxy Season Preview

2019 United Kingdom Proxy Season Preview

2019 Continental Europe Proxy Season Preview

2019 Market IQs

2019 China Market IQ

2019 Taiwan Market IQ

2019 Greece Market IQ

2019 Italy Market IQ

2018 Market IQs

2018 Portugal Market IQ

2018 Israel Market IQ

2018 Singapore Market IQ

2018 Hong Kong Market IQ

2018 China Market IQ

2018 France Market IQ

2018 Japan Market IQ

2018 Netherlands Market IQ

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For questions, comments or suggestions, email contactus@isscorporatesolutions.com.


Drawing on ISS' Data Desk, Governance Insights delivers news and analysis of corporate governance developments, including insights and reporting found in no other media, on a periodic basis. While we exercise due care in compiling this newsletter, we assume no liability with respect to the consequences of relying on this information for investment or other purposes.


Founded in 1985 as Institutional Shareholder Services Inc., ISS is the world’s leading provider of corporate governance and responsible investment (RI) solutions for asset owners, asset managers, hedge funds, and asset service providers. ISS’ solutions include: objective governance research and recommendations; RI data, analytics, advisory and research; end-to-end proxy voting and distribution solutions; turnkey securities class-action claims management (provided by Securities Class Action Services, LLC); and reliable global governance data and modeling tools. Clients rely on ISS' expertise to help them make informed corporate governance and responsible investment decisions. For more information, please visit www.issgovernance.com.

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ICS is a wholly owned subsidiary of Institutional Shareholder Services Inc. (ISS). ICS provides advisory services, analytical tools and publications to companies to enable them to improve shareholder value and reduce risk through the adoption of improved corporate governance practices. The ISS Global Research Department, which is separate from ICS, will not give preferential treatment to, and is under no obligation to support, any proxy proposal of a corporate issuer (whether or not that corporate issuer has purchased products or services from ICS).  Similarly, ISS’ responsible investment research and analytics teams will not provide preferential treatment to, and is under no obligation to provide a favorable rating, assessment and/or any other favorable result to, any corporate issuer (whether or not that corporate issuer has purchased products or services from ICS).  No statement from an employee of ICS should be construed as a guarantee that ISS will (a) recommend that its clients vote in favor of any particular proxy proposal nor (b) provide a favorable rating or other assessment of any corporate issuer.

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