Time to Change Your Directors!

Is there really a dearth of talent in Singapore? Or are there other reasons?

Why are some company directors, directors of so many companies?

Not long ago, I did a count. Here’s what I found at that time:

A particular company director was found to be a director of 117 companies.

Another held a total of 114 directorships.

Yet another sat on 105 boards.

It is the view of experts that a full-time executive with three or more board seats faces time constraints which may render his service ineffective.

And for retired execs, it is deemed that they are ineffective if they sit on more than six boards.

Studies also found that the presence of such directors on the board correlates with excessive CEO compensation and imply that busy directors do not contribute as much to effective corporate governance.

When companies announce the appointment of an outside director that is a full-time executive at another firm and holds three or more other board seats, the market reaction tends to be negative.

Yet, this happens all the time in Singapore.

When I see a person sitting on so many boards, I immediately form a negative opinion of that person.

Do they actually contribute anything useful? Do they add value?

How can such a person be really effective?

Of course it is glamorous for narcissist to be named as a director of this board or another and of course one can make a heck of a lot of money collecting director fees, but this phenomenon should end.

In other countries there are laws limiting the number of directorships one can hold.

Here in Singapore, the Singapore Institute of Directors refuses to take a firm stand.

What is worse is when people with totally zero subject matter expertise are helicoptered into companies to sit on their boards as a favor – many politicians, retired armed forces leaders, friends, relatives, etc all sit on boards of companies in which they have no professional knowledge about. True, an outsider’s view may be refreshing but what is a retired army officer doing as a director of a hospital, for example?

Boards should also have a balanced mix of skills, knowledge and experience, and conflicts of interest should be avoided. Board members should not have conflicting appointments rendering them unable to objectively and satisfactorily discharge their duties.

The length of service is another disturbing factor.

It is therefore heartening to recently see a major institution like the Monetary Authority of Singapore leading by example in refreshing itself, vis-a-vis the board of directors, to stay nimble and forward-looking.

Its Code of Corporate Governance suggests that, for reasons of independence, directors should not serve beyond nine years.

If you are involved in directorships, it’s time you ask some hard questions.

Surely you don’t want people to think that you are involved in a company that is more like a zoo or a circus.