As Board Members, CEOs Often Spread Too Thin

NEW YORK — Considering their million-dollar salaries, stock options and perks, you might think corporate chiefs should spend all their time tending to the business at hand.

Some do; many don’t. Prominent among the latter’s activities are sitting in on the affairs of other companies, where as members of the board they evaluate management’s strategic and business plans.

These are serious duties, taking a good deal of time, study and travel. Since some executives sit on a half-dozen or more boards, it is reasonable to estimate that they spend several months a year on other people’s businesses.

Is this what they’re paid to do? Can they do justice to the shareholders of their own company and those of others? How do they qualify for seats?

These are eternal questions with ongoing answers, the latest coming in a report released last November on “Director Professionalism” from the National Assn. of Corporate Directors Blue Ribbon Commission.

Chief executives and other senior executives, it said, should hold no more than three public company directorships, including seats on their own board. Other individuals would best be limited to no more than six directorships.

“Obviously, director professionalism requires a significant amount of time,” the commission members concluded, citing earlier studies suggesting that preparing and attending board meetings requires up to 190 hours a year.

Conceivably, it could be much more. Professionalism, says the commission, “carries with it a responsibility for near-perfect attendance at board and committee meetings, including specially called sessions.”

It requires directors to “rigorously prepare prior to a meeting, give undivided attention at each meeting and actively participate in meetings through relevant and thought-provoking questions and comments.”

That’s part of the job. A director also should be available to “provide advice and counsel to the CEO and other top corporate officers upon request, and to use his or her initiative to provide unsolicited advice to the CEO.”

The report is more than 50 pages long, and most of it concerns the requirements, duties, responsibilities, behavior, ethics, independence, stock ownership and financial and legal literacy of directors.

It’s a large order and, says professor Eugene Jennings, for 30 years a confidential advisor to corporate chiefs, many CEOs are spread too thin, diluting their ability to serve either their own or other companies.

“I don’t think a chief executive officer should be on any board other than his own,” he says, although he thinks the option should remain voluntary rather than be dictated by a private-sector or public-sector entity.

CEOs often counter limitations on their directorships by contending such activities expose them to new management techniques and know-how, thus making them more valuable to their own companies. It is a hard notion to dispel.

But, says Jennings, author of “How Managers Become Chiefs,” many CEOs set up confidential networks with other CEOs. “You can get the same information from another CEO over a cup of coffee,” he says.

That, in a way of looking at things, would be a sort of reversion to the old days, when corporate directorships often were clubby events attended by like-minded friends. Years ago, Ralph Lowell of Boston served on 33 boards.

Sitting on boards today is a far more serious matter, with distinct obligations to look after the best interests of shareholders. Conceivably, that could mean ousting the chief for gadding about on too many boards.