Multiple Directorships on FTSE 100 Banking Boards

Multiple Directorships on FTSE 100 Banking Boards

You may recall a few weeks ago a post on the draft EU Directive proposing caps on multiple directorships on banking boards (see here) for which I provided some anecdotal evidence from the Royal Bank of Scotland.

Fortunately (or some may say unfortunately if you have ever had the desire to look at a bank's annual reports) my random sample contained all five banks featured in the FTSE 100: Barclays; HSBC; Llyods; RBS; and Standard Chartered. 

The graphs below represent total and mean of multiple directorships held by executives and non-executives in a five year data period of 2006-2010. The first graph is multiple directorships at the time the annual report was published whereas the second and third evidence those held by directors who served throughout the financial year including the mean.

 

Commentary

Although the data is only descriptive at the moment, one can still make some assumptions. Resource Dependence Theory claims that we should see a rise in multiple directorships where there are difficult market conditions as multiple directorships are characteristics of good managers in a managerial labour market. 2008 onwards we can take as what one could describe as "difficult market conditions".

For non-executives we however see a sharp decrease in 2008. This may be down to higher levels of board changes in that year due to the recession which may have been caused by the company itself terminating contracts or non-executives perceiving increased liability and resigning from positions themselves.

However, since 2008 the mean number of non-executive multiple directorships have been steadily rising again. This may be consistent with the Resource Dependence Theory that directors increase their directorships to help in the difficult market conditions they face.

Executives on the other hand have seen pretty much the opposite to non-executives. A growth in multiple directorships towards the recession followed by a steady decline post-recession. If one trusts managerial labour markets this may have been caused by the perception of banking boards performing well up until the recession resulting in more offers for other positions. Once the recession hit then multiple directorships decreased for executives due to their "poor performance" in managerial labour markets. Again, board changes may have also been important for banks in 2008 which may have played a part in the decrease.

Other information

For bank boards in 2006-2010 the average board membership for the year were the following (exec:non-exec)

2006: 5.8:12.4

2007: 5:11.6

2008: 5.8:13.4

2009: 4.8:13.6

2010: 4.6:11.8

On top of this information data has also been collected in regards to meeting attendance; independence; equity ownership; share capital; and remuneration. It will be interesting to see how these factors correlate with multiple directorships. Remuneration may be particularly interesting as anecdotal evidence seems to show an increase in remuneration for non-executives due to their "increased responsibility" as cited as a reason by numerous annual reports yet multiple directorships for non-executives has been increasing since 2008 and fairly unchanged between 2006 and 2010.

Although other studies have documented attendance of directors at meetings as a variable it is curious whether it is a reliable variable on how directors spend their time or whether mutliple directorships can affect attendance at meetings. It is of no surprise that my data shows high attendance at meetings from directors no matter how many boards they are on. If a director is on three or four boards it may not be too burdensome to attend 48 or so meetings a year. Obtaining clearer data on whether a director's ability to perform his/her duties may require a qualitative assessment on an individual level.  

For more commentary on directors' duties and shareholder litigation, visit Gibbs: Law and Life, a blog centering on directors' duties and company law, particularly on interpretation and practicality of directors' duties in the 21st Century.

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