It’s Simple Math (Even for University Presidents)

Yesterday, I was quoted in this Indianapolis Star article as saying that “outside directors should devote 200 hours or more a year to adequately do their jobs.” For those following corporate governance, this shouldn’t be a bombshell, as others have thrown around 200 hours as the post-SOX time commitment for quite a while (see, e.g., the ABA’s Corporate Directors Guidebook).

The article focused on the current President of Purdue University, Dr. Martin C. Jischke, who serves on three boards. Dr. Jischke is quoted in the article as saying that my 200-hour estimate “sounded high.” Probably proving that I take blogging too seriously, I decided to analyze his three directorships:

—Wabash National.  According to the company’s 2006 proxy statement, the Board met five times during 2005.  Dr. Jischke served on the board’s governance and compensation committees, which met four times and six times during 2005, respectively.

—Duke Realty.  According to the company’s 2006 proxy statement, the Board met six times during 2005, including 4 executive sessions for independent directors.  Dr. Jischke served on the Board’s compensation committee, which met four times during 2005.

—Kerr-McGee. (Note: the company was acquired last August.)  According to the company’s 2006 proxy statement, the Board met fourteen times during 2005.  Dr. Jischke served on the Board’s governance and compensation committees, which met four times each during 2005.

So during 2005, assuming that Dr. Jischke attended all of the board meetings for these three companies (he did attend at least 75% for each company; otherwise there would be proxy disclosure stating that he hadn’t), he attended 25 board meetings and 22 committee meetings (not counting executive sessions, etc.).

Being generous in my calculations, let’s assume Dr. Jischke spent eight hours per board meeting (which includes the time spent at a companion committee meeting and travel time, etc.). Based on this assumption, I figure Dr. Jischke spent 200 hours alone just sitting in board-related meetings (i.e., 25 meetings x 8 hours).

Now, I recognize that one of Dr. Jischke’s companies was pondering a merger during 2005 and thus held an unusually large number of meetings–but if you sit on three boards, odds are that one of them will be in crisis mode or considering extraordinary events at any given time. Even if I was to assume “normal” meeting frequency for each company on which he serves, and cut the number of board meetings attributed to Kerr-McGee in half, I still come up with Dr. Jischke spending about 150 hours on board-related meetings each year (i.e., 16 meetings x 8 hours).

In this age of close director scrutiny when it comes to the duty of care, I don’t see how a director doesn’t spend at least one hour doing board-related reading and research for each hour of meeting.  Even my conservative estimate of 150 hours meeting, when added to 150 hours preparing, tells us that Dr. Jischke will spend 300 hours per year on board-related meetings alone. So I think I have room to argue that my quote of 200 hours was even conservative–if you’re doing the job properly.