Gaps in ‘busy directors’ study

First published in The Straits Times on Nov 8, 2014

THE report “Busier is better for board directors” (Wednesday) seems to suggest that busy directors are somehow role models for other directors.

This is based on a study which showed that those who sit on more boards have higher qualifications and better attendance at board meetings.

There are alternative explanations for these findings.

In the case of attendance at board meetings, the study failed to set a control for the number of board meetings. Therefore, hypothetically, if a board met only once and a director attended this one meeting, the attendance would be 100 per cent.

It is possible that boards with busy directors have fewer board meetings – precisely because the directors are busy.

The study also fails to take into account situations where a director arrives late and/or leaves early, or directors who call in to participate in part of the meeting, which then constitutes “attendance”. Board meetings can also vary considerably in duration and substance. There are also issues of attendance at committee meetings and shareholders’ meetings.

More importantly, there is much more to a director’s responsibilities than just attending meetings.

A responsible director would be thoroughly prepared for meetings, be available to participate in discussions and decision-making between meetings, be available for major company events, undergo ongoing professional education, and make site visits as required – just to name a few things.

Are busy directors able to do all these things as well as less busy directors? Are busy directors more likely to be “fair weather” directors who resign when the company is in financial strife because they are too busy to give the company the necessary attention in its time of need? We should not jump to conclusions on the basis of possibly spurious findings.

Mak Yuen Teen (Associate Professor)