Should Non-CEO Executives Serve on Outside Boards?

Inside Americas Boardrooms
Most sitting CEOs and other C-suite executives who serve on an outside board will tell you that they find great value in their experience. At their board companies, sitting executives face new challenges and develop solutions that they can bring back to their primary company. Yet, a recent Equilar study raises the question: Is this board experience at the expense of primary company performance?

In the August 2017 report titled, CFOs on Boards: Higher Pay, Lower Performance, Equilar examined CFO pay and company performance at nearly 300 large-cap organizations. The data revealed two key findings:

  1. CFOs serving on at least one outside board were awarded higher pay, and
  2. Companies with CFOs serving on outside boards saw lower performance when it came to total shareholder return (TSR), revenue and net income, which was amplified for companies where CFOs served on two or more outside boards.
While the Equilar study only reveals correlation (not causation), it nevertheless raises an important question: Should non-CEO executives be allowed to serve on outside boards? If so, how many?

In this episode filmed at The Conference Board studios, Host TK Kerstetter welcomes Doug Chia, Executive Director of The Conference Board Governance Center, to discuss Equilar's recent study and the important questions that it raises.

[blockquote source="Doug Chia, Executive Director, The Conference Board Governance Center"]''Some companies go so far as to look for opportunities for their executives to sit on outside boards, so clearly there is value there. Here, the importance is internal governance-having a written policy that is well-articulated and clear to everybody..."[/blockquote]

Kerstetter and Chia debate the pros, cons, and opportunities for sitting executives, board members, and the companies they serve.
Facebook icon
LinkedIn icon
Twitter icon