Overboarding is not always top of mind for boards, but considering the elevated risk that can reasonably result and what research has revealed, it should be a stronger concern for mitigation and reputation purposes.

There has not been a clear and universal definition of the problem, though one does exist (more on that later), and the practice is spawning more regular, important conversations.

It has been determined – and is becoming increasingly well-known – that corporations take on elevated risk when a director “sits on an excessive number of boards,” and that practice is longstanding because of the “excessive time commitments and an inability to fulfill their duties.”

The descriptor “excessive” is vivid, yet it lacks precision and clarity. It’s also subjective for many organizations, as it is dependent on various factors. The Harvard Law School Forum (HLSF) on Corporate Governance and Financial Regulation (CGFR) has provided insight to further define the problem. “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.”

Why that is most problematic, says the HLSF on CGFR, is clear: “…companies with overboarded directors performed worse compared to companies with no overboarded directors.”

That analysis details tangible costs, which may prove eye-opening: Weaknesses in governance, compliance and reputation are associated with overboarding.

“Staleness, entrenchment and lack of oversight were considered key factors that may have led to major corporate scandals in the early 2000s and the financial crisis,” the HLSF on CGFR has found.

So, why isn’t this process considered detrimental and low-level risk management? “In fairness, there has been tremendous progress on this issue in the last 20 years,” said Nell Minow, Vice Chair of ValueEdge Advisors, who was once called “the queen of good corporate governance” by Business Week online and is a former recipient of the International Corporate Governance Network award for exceptional achievement in the field of corporate governance.

“It used to be that many directors served on more than five boards, and there were always a few – generally former government officials – who were on as many as 10,” Minow said. “Former Secretary of Defense Frank Carlucci served on 30, averaging a board meeting a day, though not all were public companies.”

10? 30? That might qualify, arguably, as “excessive” and significantly decrease effectiveness and value offered.

Overboarding can occur in different ways that might not have been well-known then, but are understood now. “There were also a lot of reciprocals, with CEOs serving on each other’s boards or serving together on a third board. Following the Enron and WorldCom era and the financial meltdown, it is rare for directors to serve on more than three or to have those kinds of secondary connections, largely because of shareholder objections,” Minow said.

For those who feel competent in serving on multiple boards, Minow details how overboarding still presents risk.

“We estimate that it takes at least 240 hours a year to serve on a board if everything is going perfectly. If there is a problem, it can quickly become a more than full-time job,” she said.

That’s performing on just one board, in addition to a person’s primarily professional and personal responsibilities. “Corporate insiders are often perfectly happy with an ineffective board,” Minow asserts. “But the board represents shareholders, and shareholders are deeply concerned about overboarding, which is why it has decreased so sharply.”

Boeing is one glaring example, she states. It has greatly harmed its reputation with questionable leadership in decision-making prior to and during its ongoing crisis, earning the company intense scrutiny from media, government, crisis management professionals and board governance experts.

Minow, commenting in a CBS News article, amid 737 Max disasters, on why Boeing’s board was busy elsewhere, stated “Boeing’s board failed to prevent the first crash, which is a concern, but they then failed to act after the first crash, which is the dictionary definition of a problem,” Minow said.

An additional concern should be obvious to boards, yet it clearly proved elusive to some organizations: “Directors cannot give the job the attention it deserves if they don’t have the time or if they have conflicts of interest,” she said.

Her corrective recommendation is direct: “Right now, directors can serve, even if they don’t have the support of a majority of the shareholders,” she said. “If 99 percent of the shareholders vote against a director, he or she is still elected. That has to stop. No director should be allowed to serve without the support of a majority of the shareholders,” Minow asserts.

There will be benefits gained, she predicts – significant bottom-line ones, as well as improved, critically necessary risk management. “That will enable the large, sophisticated financial professionals who oversee the vast majority of stock — pension funds, mutual funds, index funds — to replace directors who overpay or mis-pay executives, serve on too many boards or permit accounting or acquisition failures,” Minow concluded.

Serving on multiple boards, maybe with differing levels of time commitments, might not be considered troublesome, risk miscalculated and mismanaged, yet research disproves that belief, and Minow also disagrees with that assumption. While those serving on multiple boards may consider it a personal insult to have their service questioned, objectively, mastery is difficult to accomplish when focus is more widespread or scattered. Value could still be present in overboarding, but it is diluted. Greater exposure to risks increases as mistakes and errors become more likely.

What can be learned? There is no shortage of qualified, valuable leaders to serve competently and with excellence on boards. There is little need to overboard, and there are numerous risk management reasons to avoid it.

With the cultural expectation for improved diversity of demographics and perspectives and the wisdom of the refreshment of boards, there is always opportunity for improvement, and there are tangible benefits waiting to be realized.

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Michael Toebe is a specialist for reputation and crisis communications, serving organizations and high-profile individuals. He is the publisher of the Reputation Times newsletter and author of an upcoming book on reputation crises.

This article was originally published in Corporate Compliance Insights and is republished with permission of the publisher.