Academics Find "Busy" Directors Rate Low on Shareholder Satisfaction

A recent paper from University of Pennsylvania academics finds that busy corporate directors garner low shareholder satisfaction scores. “On average, shareholders perceive that the costs of busy directors exceed their benefits. The percentage of “For” votes that a busy director receives is, on average, about one percentage point lower than that of a non-busy director,” the authors write. They add that the drop in shareholder satisfaction for busy directors holds even when controlling for various factors, including a director’s age, tenure, gender, retirement status and committee membership. The authors note that unlike other academic work which measures firm-level performance implications of corporate boards that have a large proportion of “busy” directors, their research develops and validates shareholder voting as a proxy for shareholders’ satisfaction with busy directors. The authors also note that the negative relation between shareholder satisfaction and busyness is smaller for retired directors and is larger for directors who are full-time executives and who sit on boards where fiscal-year-ends cluster in the same month. A previous study examined the effect of busy corporate directors on the value of a set of international firms from 1999-2012 and concluded that firms with busy directors who sit on multiple boards exhibit lower market-to-book ratios and reduced profitability.