A few days ago, I was quoted in this Indy Star article as saying that “outside directors should devote 200 hours or more a year to adequately do their jobs.” For those following governance, this shouldn’t be a bombshell as others have thrown around 200 hours as the post-SOX time commitment for quite a while (e.g. ABA’s Corporate Directors Handbook).
The article focused on the current President of Purdue University – Dr. Martin Jischke – who serves on three boards. The President is quoted in the article as saying that my 200 hour estimate “sounded high.” Probably proving that I take blogging too seriously, I decided to analyze his three directorships:
– Wabash National – According to the company’s 2006 proxy statement, the Board meet 5x during 2005 – and Dr. Jischke served on the board’s governance and compensation committees, which met 4x and 6x during 2005, respectively.
– Duke Realty – According to the company’s 2006 proxy statement, the Board meet 6x during 2005 (including 4 executive sessions for independent directors) – and Dr. Jischke served on the board’s compensation committee, which met 4x during 2005.
– Kerr-McGee (which was acquired last August; Dr. Jischke recently joined Vectren’s board) – According to the company’s 2006 proxy statement, the Board meet 14x during 2005 – and Dr. Jischke served on the board’s governance and compensation committees, which met 4x and 4x during 2005, respectively.
So, during 2005, assuming that Dr. Jischke attended all of the board meetings for these three companies (he did attend at least 75% for each company; otherwise there would be proxy disclosure that he hadn’t), he attended 25 board meetings and 22 committee meetings (not counting executive sessions, etc.).
Being generous in my calculations, let’s assume Dr. Jischke spent 8 hours per board meeting (which includes the time spent at a companion committee meeting, travel time, etc.). Based on this assumption, I figure Dr. Jischke spent 200 hours alone just sitting in board-related meetings (i.e. 25 x 8 hours).
Now, I recognize that one of Dr. Jischke’s companies was pondering a merger during 2005 and thus held an unusually large number of meetings – but if you sit on three boards, odds are that one of them will be in crisis mode or considering extraordinary events at any given time. But even if I was to presume “normal times” for each company on which he serves – and cut the number of board meetings for the mergerd company in half – I still come up with Dr. Jischke spending 150 hours for board-related meetings each year.
And in this age of close director scrutiny when it comes to the duty of care, I don’t see how a director doesn’t spend at least one hour doing board-related reading and research for each hour of meeting. Putting my “final answer” of 150 hours meeting plus 150 hours preparing = 300 hours per year. So I think I have room to argue that my estimate of 200 hours was even conservative if you’re doing the job properly.
That’s why I maintain – in our “Director Recruitment” Practice Area – that someone working full-time can’t handle more than one – and two at the most – board seats…
Last Batch of PLI’s “SEC Speaks” Notes: Enforcement
New NACD-CII Task Force Report
Last month, the NACD and CII jointly issued this Task Force Report that includes a series of governance recommendations.