Big Investors Want Directors to Stop Sitting On So Many Boards
By Sarah Krouse and Joann S. Lublin
Giant money managers voted against the re-election of Ronald Havner, Jr. in May to the board of a real-estate company. Their reason: He runs a different company and sits on two other boards.
After about 56% of voting shares were cast against Mr. Havner remaining an AvalonBay Communities Inc. director, he said he would resign, an offer rejected by the rest of the AvalonBay board. BlackRock Inc. and State Street Corp.'s money-management unit were among the large investors that voted against his re-election.
Mr. Havner, who is chief executive of Public Storage, also decided not to stand for re-election at California Resources Corp.'s 2018 annual meeting "due to concerns raised by investors relating to the time commitment required" for those roles, the company said in a regulatory filing.
Mr. Havner "has taken steps to reduce the number of boards upon which he serves," said a lawyer for Public Storage and PS Business Parks Inc., a related company.
Major institutional investors, governance advisers and boards themselves are cracking down on so-called overboarding, trying to ensure that directors don't spread themselves too thin. Overstretched directors lack time to adequately monitor management, these critics contend.
"There is no good reason for having an overboarded director," said Charles Elson, head of the Weinberg Center for Corporate Governance at University of Delaware. He expects institutional-investor pressure will make S&P 500 board members with at least five seats a dying breed.
Many directors who serve multiple boards contend that they adequately manage their time and can handle their board responsibilities.
A new analysis of S&P 500 chief executives for The Wall Street Journal by Equilar, a research firm, suggests that leaders with multiple outside corporate board seats and their employers make more money, but their shareholders see lower returns than those with one or zero outside directorships.