The Emergence of a New Standard for Director Overboarding
Another key takeaway from the 2019 proxy season is the emergence of a new, stricter standard for what constitutes director “overboarding.” Back in 2017, The Ticker reported that the leading proxy advisory firms had recently tightened their standards by adopting policies of generally recommending voting against the election of directors who serve on more than five public company boards. While the current voting policies of Institutional Shareholder Services (ISS) and Glass Lewis still reflect a five-board limit, leading investors have shifted towards a new standard of no more than four public boards, according to a July report by ISS Analytics.
In its 2019 Proxy Season Updates, Vanguard announced that its funds “will generally vote against (i) active executive officers who sit on more than one public company board beyond their employer’s and (ii) other directors who sit on more than four public company boards.” Similarly, BlackRock’s 2019 Proxy Voting Guidelines state that it “will consider” voting against a director who serves on “an excess number of boards,” which it defines as (i) a public company CEO who sits on more than one additional public company board and (ii) any other director who sits on more than three additional public company boards.
In its report, ISS Analytics provides data showing a sharp decline in the number of directors serving on five or more boards compared to a decade ago and predicts that opposition to the election of directors who serve on more than four boards will continue to rise as more investors adopt stricter policies on overboarding.