The National Association of Corporate Directors (NACD) has just published its 2013–2014 Public Company Governance Survey. The news release and several top-line findings are available here. A copy of the full survey report is available from the NACD bookstore.
The report makes for interesting reading. One metric that caught my attention was the average amount of time that board members commit to their work. Respondents claimed their annual time commitment was 235 hours per board. Using an 8-hour day as the basis, this means that directors of public companies in America commit, on average, 2.5 days per month to each board of which they are a director. Does this sound like a lot of time, or not much? By way of comparison, most boards of public companies in New Zealand meet ten or eleven times per year, and board meetings typically last between four and seven hours. Even taking the generous end of these ranges, and doubling the figure to account for committee work and pre-reading, the figure for a New Zealand director is about 154 hours, or roughly two-thirds of the American figure.
What amount of time is reasonable? Clearly, boards and companies are complex, socially dynamic, and subject to the vagaries of markets and many internal and external factors, so every situation is different. However, I would have thought that a figure closer to 400–450 hours per year would be necessary, if a director is to understand the business of the business well (this being a prerequisite to making an effective contribution to the development of strategy and the making of informed strategic decisions), and monitor performance well. Could the lower levels of commitment that seem to be typical be material to the various failures of governance that have come to light in recent years?
The report makes for interesting reading. One metric that caught my attention was the average amount of time that board members commit to their work. Respondents claimed their annual time commitment was 235 hours per board. Using an 8-hour day as the basis, this means that directors of public companies in America commit, on average, 2.5 days per month to each board of which they are a director. Does this sound like a lot of time, or not much? By way of comparison, most boards of public companies in New Zealand meet ten or eleven times per year, and board meetings typically last between four and seven hours. Even taking the generous end of these ranges, and doubling the figure to account for committee work and pre-reading, the figure for a New Zealand director is about 154 hours, or roughly two-thirds of the American figure.
What amount of time is reasonable? Clearly, boards and companies are complex, socially dynamic, and subject to the vagaries of markets and many internal and external factors, so every situation is different. However, I would have thought that a figure closer to 400–450 hours per year would be necessary, if a director is to understand the business of the business well (this being a prerequisite to making an effective contribution to the development of strategy and the making of informed strategic decisions), and monitor performance well. Could the lower levels of commitment that seem to be typical be material to the various failures of governance that have come to light in recent years?