MULTIPLE DIRECTORSHIPS
29/11/2005
Multiple Directorships
Media & Communications: AICD Views
Ideal number of directorships that an individual should hold
The AICD believes that there is no prescriptive answer to the ideal number of directorships that a person should hold. The number of directorships that a person accepts should be limited only by that person's capacity to properly carry out the obligations required of each directorship on behalf of the shareholders.
To suggest arbitrarily drawing a line is problematic as there are a number of factors that can impact a person’s ability to perform multiple directorships. These include:
- the size and complexity of the company's operations which could impact on the time required in travel or other activity needed to gain a proper understanding of the business
- the holding of a chairmanship as the work load and responsibility increases with this position and the number of other directorships should ideally be less as a result
Benefits of appointing directors with experience
The AICD believes companies can benefit by having board members with multiple directorships. Each individual directorship brings valuable experience and additional business insights.
Directors can mentally compare the performance of all the corporations on whose boards they sit and, as a result, can influence management towards improved performance for the benefit of all shareholders. Setting a limit to the number of directorships would set a limit to the amount of experience a director could bring to a board.
Importance of effective evaluation
The AICD believes effective director evaluation by both boards and the market is the best way to ensure the right balance of board positions. If directors are performing strongly, the number of boards he/she sits on should not matter.
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