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Modest Involvement

At the end of a previous thread, fellow EphBlogger David Nickerson ’97 asks:

Factual question: How much time does it take to serve on a corporate board? Don’t they just rubber stamp the actions of the CEO and CFO? Isn’t the inactivity of corporate boards part of the problem in corporate governance and oversight?

Asking how much time it takes to serve on a corporate board is like asking how much time it takes to study for classes in college. It varies. The more serious the school and the more responsible the student, the more time it takes. The same applies to corporate boards. If you are on the board of a serious company (large, publically traded) and are a diligent director it will take a fair amount of time. This is even more true if you serve on the company’s audit committee.

Professor Stephen M. Wallenstein claims (page 17) that “a large public board requires 200 to 250 hours a year of service.” Neil Minnow, co-founder and editor of the Corporate Library, says “18 days per year”.

That seems about right to me, although when disaster strikes (as it has for Marsh this month) these become dramatic underestimates.

Assume for a second that Schapiro and Roseman spend 200 hours a year on their board service. Given that each of them is compensated more than $100,000 per year, this would work out to a wage rate of more than $500 per hour. Nice work, if you can get it.

How can we square this with the faculty handbook’s requirement that:

Modest involvement in outside consulting and other similar remunerated activity is also permitted. Whenever such activity requires that the faculty member be absent from campus for the equivalent of more than eight weekdays per semester, permission of the Dean of the Faculty must be obtained.

I don’t think that we can. Whatever else may be said a job that requires 200 hours per year at a rate of $500 per hour, it can hardly be termed “modest involvement.”

Either the faculty handbook should be revised (perhaps just by removing the word “modest”) or Schapiro/Roseman should resign their board memberships. I am not sure which of these options I prefer, but I can’t see any other alternative. Rules are rules. They apply as much to the President and to the Dean as they do to the youngest assistant professor.

Those interested in more background reading about academics on corporate boards might try here or here.

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#1 Comment By Steve Ames On October 25, 2004 @ 10:14 pm

The Forbes “Person Tearsheet” for Mr Schapiro also lists these positions. He must be a wealthy man.

Director for
Intervisual Books, Inc. (IVBK)
Trust Manager for
Weingarten Realty Investors (WRI)

#2 Comment By Steve Ames ’87 On October 25, 2004 @ 10:15 pm

Sorry, neglected to show my affiliation in that comment.

#3 Comment By David Kane ’88 On October 25, 2004 @ 11:55 pm

I don’t see Morty listed on either company’s website. There is a “Marc Shapiro” listed. I think that Forbes is mistaken.

#4 Comment By Aidan On October 26, 2004 @ 1:37 pm